On February 8, 2018, the Statutory Accounting Principles Working Group (SAPWG) for the National Association of Insurance Commissioners (NAIC) met via conference call to discuss INT 18-01: Updated Tax Estimates under the Tax Cuts and Job Act (the Act). Three issues were discussed:
- Reporting and updating estimates related to the Act
- Reporting Changes to Deferred Tax Assets and Liabilities related to the Act
- Completion of Footnote 9c
The following consensus was reached:
- Int 18-01 will allow a limited-scope, limited time exception to reporting changes in estimates that occur after the filing of the Annual Statement and before issuing of audited financial statements. Reasonable estimates updated or established after the issuance of 2017 annual statements but before issuance of the year-end 2017 audited financial statements shall not be recognized as Type I subsequent events and therefore not require recognition in the 2017 audited financial statements. This assumes Companies have made a good faith effort to estimate the impact of the Act on its 2017 financial statements.
- Companies shall continue to follow existing reporting instructions for changes related to the Act. Clarification was provided for the following:
- Change in unrealized capital gains and losses. Tax effects previously reflected in unrealized capital gains shall be re-measured for the change in corporate tax rate in the same reporting line.
- Changes in net deferred income tax. Represents the change in net deferred tax excluding the change reflected in unrealized capital gains and any change in nonadmitted deferred tax assets.
- Represents changes in nonadmitted DTAs and includes the effect of changes in the corporate tax rate.
- Completion of Note 9c. To clarify any confusion based upon current guidance, DTAs and DTLs as of December 31, 2017 are to be computed at enacted tax rates (21%). Prior year amounts (2016) are not to be restated and a narrative shall be included in the PDF version of the Notes detailing information on the approximate change in DTAs and DTLs caused by the tax rate change.
Due to the nature of the issues covered, INT-18 will be nullified on December 31, 2018.
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ABOUT THE AUTHOR
Hank is a Principal and Treasurer with BSSF. He specializes in accounting and audits of property and casualty insurance companies and is one of the leaders of the BSSF Insurance Practice, which serves clients in the Mid-Atlantic Region, with a focus in Pennsylvania, New Jersey, Maryland, Delaware, Virginia, and New York.