In Day 8’s post, we discussed nuances related to reporting invested assets in the scope of SSAP No. 48 – Joint Ventures, Partnerships and Limited Liability Companies. In general, SSAP No. 48 requires a financial statement audit for admission of investments with a more than minor ownership interest or where control is present. If an insurer has less than 10% ownership or lacks control, the preference is to use audited U.S. GAAP financial statements.
However, when audited U.S. GAAP financial statements are not available, the following three alternatives can be used (with caveats in paragraph 9 of the statement):
- investee’s audited foreign GAAP with an audited U.S. GAAP reconciliation footnote
- audited IFRS financial statements
- audited U.S. tax equity financial statements
During the 2022 Spring Meeting, the Working Group exposed two options for the U.S. GAAP audit exception. The first option proposed to delete alternative number three as a permissible valuation method in its entirety as this method seems not to be used by the carriers. The second option proposed to add clarification that if alternative number three is elected, the audit should be done at the investee level.
The adopted revision retained the tax basis valuation exception with proposed clarification for the audit requirement.