Accounting Practices and Procedures (E) Task Force
Accounting Practices and Procedures (E) Task Force Page
Joint Executive (EX) / Plenary Committee Summary Report
Summer 2009 Meeting Summaries Index

The Accounting Practices and Procedures (E) Task Force met June 14, 2009.

During this meeting, the Task Force received opening statements from its working groups regarding significant items:

• The Emerging Accounting Issues Working Group discussed if there was a need to provide guidance on re-securitization of residential mortgage backed securities (Re-Remic) transactions. After the meeting the chair learned that there have been some completed transactions, and the chair noted that the Working Group may need to hold an interim call to discuss a possible interpretation.

• The Task force discussed the following significant items from the Statutory Accounting Principles Working Group:

  • At the request of its Separate Account Subgroup, the Working Group agreed to submit a referral to the Financial Condition (E) Committee requesting revisions to existing Model Laws, or the establishment of a new Model Law, to require risk charges for individual separate account products. Current model law requires charges for group contracts, but does not require the establishment of risk charges for individual separate account products that are guaranteed by the general account. The Subgroup identified this to be a matter of concern for solvency regulation.

  • The Working Group directed staff to begin drafting an issue paper for the development of a new SSAP to incorporate guidance FSP FAS 115-2 and 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. The Working Group recognizes that they may elect to reconsider this direction if it is determined that certain items are deemed inappropriate for statutory accounting. Items that will be included for statutory consideration include: (1) modification of the OTTI trigger for credit-related impairments; (2) establishment of guidance to bifurcate credit and other-than-credit impairments, with only credit-related OTTI impairments being reflected as realized losses, unless there is an intent to sell; and (3) guidance to supersede terminology within existing SSAPs so the assessment of the collectability of cash flows is modified to reflect “the recovery of the entire cost basis of the security” in order to clarify that an entity should not wait for an event of default to conclude that the cash flows are not likely to be collected. The Working Group also heard unsolicited comments requesting significant modifications to the GAAP guidance.

  • The Working Group exposed Issue Paper No. 138—Fair Value Measurements which proposes adoption, with modification, of FAS 157, Fair Value Measurements (FAS 157). Modifications from FAS 157 include rejection of the GAAP provision to include consideration of own-credit risk in determining the fair value of a liability.

• The Blanks Working Group adopted a blanks proposal on revising Schedule DB forms and instructions and eliminating the current forms and instructions for first quarter 2010. There was discussion regarding “hedge effectiveness.” The proposal was modified to indicate that when hedge effectiveness could not be calculated, companies should disclose the financial or economic impact of the hedge at the end of the reporting period in the Schedule DB footnotes.

Action Items of the Working Groups were as follows:

• Emerging Accounting Issues Working Group:
  1. Finalized four interpretations.
  2. Exposed two interpretations.
  3. Moved one item off of the agenda.
  4. Approved interim minutes.
• Statutory Accounting Principles Working Group:
  1. Approved a referral to the Financial Condition E Committee on a possible model law project
  2. Adopted as final revisions regarding accounting for transfers and repurchasing transactions and rejecting four agenda items as not applicable to statutory accounting.
  3. Exposed three issue papers, and two nonsubstantive changes for comment.
  4. Directed staff to begin several projects including drafting an issue paper on the bifurcation of other than temporary impairment recognition.
  5. Formed a subgroup to look at changes to the Accounting Practices and Procedures Manual structure.
  6. Received reports of its subgroups and updates on principles-based reserving and international accounting and a response on a referral.
• Blanks Working Group:
  1. Adopted 23 blanks proposals.
  2. xposed eight proposals for comment. The comment deadline on all new proposals is Aug. 21, 2009.
  3. Adopted the listing of editorial changes.
  4. Adopted a report from the Procedures Subgroup and exposed the proposed changes for a two-week comment period. A conference call will be scheduled to discuss any comments and decide an action.

Other Matters

The Task Force received referral from the Capital and Surplus Relief (E) Working Group to consider:

• How to ensure that regulators are providing the minimum information on permitted-practice requests, as specified in the Preamble of the Accounting Practices and Procedures Manual.
• The need to track the number of requests asked of states.
• The best way to handle differences of opinion on permitted-practices requests between domiciliary and non-domiciliary regulators.
• Acknowledged the retirement of Max McGee, a long-time interested party to the Task Force.

Action Items of the Task Force

1. Adopted the reports of the working groups, including a referral to the Financial Condition E Committee on possible need for a model law project.

2. Received a referral on improving ways to increase regulator communication and tracking of permitted- practice requests.