SSAP No. 10 affects insurance companies.

• Author: Weinberger, Mark
• Position: Statement of Statutory Accounting Principles, No. 10, Income Taxes

Statement of Statutory Accounting Principles (SSAP) No. 10, Income Taxes, provides new rules for the statutory accounting of income taxes by insurance companies. The guidance is likely to affect all insurance companies and will require significant compliance effort, even by companies that currently report income taxes under Financial Accounting Statement (FAS) No. 109, Accounting for Income Taxes. Companies need to evaluate the impact of SSAP No. 10, including annual statement presentations and disclosures, new information or data that may be required to implement SSAP No. 10 and the integration of the changes required by codification with existing SAP, GAAP and tax processes.

Effective Dates

A majority of states have adopted or will adopt codification of SSAP No. 10 effective Jan. 1, 2001. In accordance with Staff Accounting Bulletin No. 74, companies should provide, in their financial statements or management discussion and analysis of financial condition or both, the impact that recently issued accounting standards will have on their financial statements when adopted. Disclosures that should be considered include the impact that the standard will have on the financial statements (to the extent reasonably estimable) and any other effects reasonably likely to occur (e.g., changes in business practices, changes in availability or cost of capital and violations of debt covenants). Companies will be required to disclose the expected impact of codification on their Dec. 31, 2000 financial statements and to quantify that impact.

Overview of SSAP No. 10

Generally, SSAP No. 10 adopts FAS No. 109, with modifications for state income taxes (deferred state income taxes are not addressed), the realization criteria for deferred tax assets and the reporting of changes in deferred tax balances.

Financial statements will recognize current and deferred income tax assets and liabilities. Current SAP recognizes only current tax assets and liabilities. The annual statement will not include a separate line item for deferred taxes; rather, the annual statement balance sheet will show a current tax recoverable or current tax liability net of deferred taxes. The deferred tax asset or liability will be disclosed as a memo to these lines. Unlike FAS 109, changes in deferred tax assets or liabilities will not be reported in the income statement as a deferred tax expense or benefit. Changes in deferred tax assets and liabilities will be charged directly to a...