Accounting Standard Updates

12 Days of SSAP: SSAP No. 100R – Fair Value

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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.

Our Day 2 installment brings a relatively narrow GAAP topic and, as a result, its impact on subsequent minor adjustments the Statutory Accounting Principles Group has made to the statutory fair value promulgation (SSAP 100R). This item clarifies the treatment of instances where an entity may hold equity securities subject to contractual restrictions on future sale. We expect this item will impact a very narrow range of insurance entities.

Full Article

In June 2022, the Financial Accounting Standards Board (FASB) issued ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, to 1) clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, 2) amend a related illustrative example, and 3) add a new disclosure of the fair value of equity securities subject to contractual sale restrictions, nature and remaining duration of the restrictions, and circumstances that could cause a lapse in the restrictions, in accordance with Topic 820.

The adopted statutory revisions did not change the principles of fair value measurement but rather provided clarity in situations involving equity securities that have restrictions related to asset sales. The clarification mainly applies to two specific scenarios:

  • where the restriction is based on the entity holding the equity security
  • where the restriction is a characteristic of the equity security

As a result, the minor changes in SSAP 100R – Fair Value were a response to ASU 2022-03. The revisions did not incorporate the new proposed GAAP disclosures on sales restrictions but rather identified that items restricted as to sale would be captured as restricted assets per SSAP No. 1 – Accounting Policies, Risks and Uncertainties, and Other and subject to admittance considerations under SSAP No. 4 – Assets and Nonadmitted Assets. Updated statutory guidance essentially adopts ASU 2022-03 with respect to SAP terminology with modification to exclude the ASU 2022-03 sales restriction disclosures.

Effective Date: Immediately