Accounting Standard Updates, Tax

SAPWG Adopts INT-2018-2, Tax Act Estimates

Article reading time: less than one minute

The SAPWG meeting was brief and to the point, and the Exposure Draft of INT-2018-02, Tax Act Estimates was adopted with minor amendments and suggestions of interested parties. The main take away is that SSAP No. 9 – Subsequent Events is suspended with respect to the Tax Cuts and Jobs Act (the Act) from treated as a Type I subsequent event for purposes of the Audited Statutory Financial Statements but shall be recognized as a change in accounting estimate in the period when the change becomes known. If there is a difference between the Annual Statement and the Audited Statutory Financial Statements with respect to the Act, there is no need to record the revised estimate in the Audited Statutory Financial Statements. The reporting entity shall disclose the revised estimate in the notes to the Audited Financial Statements, but it may record the revision in its subsequent Quarterly Statements. Additionally, the interpretation clarifies that the Annual Statement captions for Changes in Unrealized Capital Gains and Losses, Changes in Net Deferred Income Tax and Changes in Nonadmitted shall reflect the effects of the Act. This interpretation will be automatically nullified on December 31, 2018.

JLK Rosenberger’s Suggestion – Determine a reasonable estimate that incorporates changes from the Act. If entities ignore the Act or don’t take its impact seriously, it may be considered an error and this interpretation of SAP 9 may not apply.