Known as “GAAP-like” disclosures, the additional items of accounting information are present because the accounting profession generally enforces its presence in financial statements of non-public insurers that are not subject to generally accepted accounting principles. The addition of such disclosures is particularly relevant in a period of declining investment value because of GAAP’s requirement for disclosure of fair-value information on investments, notes NAMIC. Non-public insurers, including mutuals, will presumably be required this year to include the fair-value information, despite not being subject to GAAP, said the association.
The joint meeting of the two committees of regulators resulted in their holding back on initiating any effort that might appear to constrain auditors from exercising judgment on the adequacy of information in non-public insurers’ financial statement. That was consistent with assertions of representatives of the American Institute of Certified Public Accountants (AICPA), who said the accounting profession’s standards for auditors would operate, whether the financial statements they audit were those of entities that follow GAAP or statutory accounting or another system of accounting.
Statutory accounting as created by the states and the NAIC is a separate but parallel system in which GAAP accounting pronouncements are regularly considered for addition to statutory accounting; if accepted, they are usually modified in some degree. The NAIC’s compendium of accounting guidance says in its Preamble that GAAP accounting does not become part of statutory accounting until and unless the NAIC has accepted it. That assertion of separateness is one reason for the request, made by the Blue Cross/Blue Shield Association, to preclude auditors from requiring GAAP-like disclosures in financial statements of non-public insurers.
A Blue Cross/BlueShield representative seeking to emphasize the separateness of the statutory accounting world noted for the regulators, “We do have a professional body acting as a standard setter.” He added that “The NAIC is the primary user of statutory financial statements.”
The two NAIC committees will work with the AICPA on illustrative disclosures on fair-valuing consistent with GAAP’s SFAS No. 157. Those will be published on the NAIC¹s website at some time.
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