Accounting Standard Updates
12 Days of SSAP: Extensions of INT 20-03 and INT 20-07 Troubled Debt Restructuring
Article reading time: 1 minute 30 seconds
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 2022 and beyond.
Today’s article covers the specifics of INT 20-03 Troubled Debt Restructuring Due to COVID-19 and INT 20-07 Troubled Debt Restructuring for Certain Debt Instruments Due to COVID-19 and the extension of the effective dates to January 1, 2022, which were originally set to expire at the end of 2020.
Full Article
One of the first items addressed by the NAIC Statutory Accounting Principles Working Group (SAPWG) in January of this year was the extension of the effective dates of INT 20-03 Troubled Debt Restructuring Due to COVID-19 and INT 20-07 Troubled Debt Restructuring for Certain Debt Instruments Due to COVID-19 to January 1, 2022, which were originally set to expire at the end of 2020.
INT 20-03 clarifies that a modification of terms for a mortgage loan or bank loan in response to COVID-19 must follow the provisions detailed in the April 7, 2020, “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” and the provisions of the CARES Act in determining whether the modification is to be reported as a troubled debt restructuring.
INT 20-07 provides limited-time practical expedients in determining whether modifications in response to COVID-19 are insignificant under SSAP No. 36, Troubled Debt Restructuring and in assessing whether an exchange is substantive under SSAP No. 103R, Transfers and Servicing of Financial Assets and Extinguishments of Liabilities requiring extinguishment and new debt recognition.
- Does not apply to insignificant modifications that reflect a 10% or lesser deficit in the contractual amount due or payment terms extensions of less than three years.
- Does not apply to assessment or recognition of impairment for debt instruments that have been modified as assessment of other than temporary impairment is based on current contract terms of the debt instrument.
- Does not apply if restructuring only affects debt covenants.
The extension of these INTs was further discussed at the December 2021 SAPWG meeting, and the decision was made to let them expire as scheduled with the possibility of being retroactively “reenacted” if requested by the industry.
Interprets the following SSAPs:
SSAP No. 36—Troubled Debt Restructuring
SSAP No. 103R—Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
Effective date:
March 1, 2020, and ending on earlier of January 1, 2022, or the date that is 60 days after the end of the national emergency for the COVID-19 outbreak.
Deeper dive on this topic:
You can read more here and here about these INT promulgations.
