Accounting Standard Updates

12 Days of SSAP: Changes to SSAP 24, ASU 2021-10, Government Assistance

Article reading time: 1 minute

Hot Take:

Hot Take

JLK Rosenberger is carrying on our holiday tradition of taking a new perspective on a holiday classic – the Twelve Days of Christmas. Rather than filling your head with turtle doves and gold rings, we are focusing on the latest changes to SSAP and how they will impact your insurance entity in 2023 and beyond.

Today we discuss the FASB’s desire to expand the financial statement disclosures related to government assistance programs and their impact on the entity’s financial statements. SAPWG decides to follow suit with minor modifications.

Full Article

In November 2021, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2021-10, Government Assistance, Disclosures by Business Entities about Government Assistance, with the goal of improving financial statement transparency regarding certain types of government assistance by increasing the disclosure of such information.

Under the new ASU, “government assistance” captures most types of assistance and includes examples of tax credits, cash grants, or grants of other assets.  However, ASU clarifies that the new disclosure requirements do not apply to government transactions that are accounted for in accordance with other codification topics, such as classifying the transactions as debt in ASC 470, income taxes in ASC 740, or as revenue from contracts with customers in ASC 606.

The NAIC followed a similar approach in making revisions to SSAP No. 24—Discontinued Operations and Unusual or Infrequent Items. The Working Group concluded these additional disclosures will not be applicable for transactions in the scope of other SSAPs (e.g., as debt per SSAP No. 15Debt and Holding Company Obligations); instead, SAPWG determined to supplement existing disclosures to require that if a reporting entity experiences unusual or infrequent items, and those items are a result of government assistance, the transaction will require identification and a description of the terms and provisions of the assistance received, and do so within the existing SSAP disclosures.

This change is not expected to affect transactions related to Paycheck Protection Program (PPP) loans. PPP transactions are in scope of SSAP No. 15, with loans recorded as liabilities and, once forgiven, recorded as a capital gain.