Life and health insurance entities, August 1, 2018. PDF
Preview Life and health insurance entities, August 1, 2018.
Audit and Accounting Guide Life and Health Insurance Entities August 1, 2018 Audit and Accounting Guide Life and Health Insurance Entities August 1, 2018 23574-349 Copyright © 2018 by American Institute of Certified Public Accountants. All rights reserved. For information about the procedure for requesting permission to make copies of any part of this work, please email [email protected] with your request. Otherwise, requests should be written and mailed to Permissions Department, 220 Leigh Farm Road, Durham, NC 27707-8110. 1 2 3 4 5 6 7 8 9 0 AAP 1 9 8 ISBN 978-1-94549-850-3 iii Preface PREPAREDBYTHEINSURANCECOMPANIESCOMMITTEEANDTHE LIFEINSURANCEAUDITGUIDETASKFORCE (UpdatedasofAugust1,2018) About AICPA Audit and Accounting Guides ThisAICPAAuditandAccountingGuidewasdevelopedbytheformerInsur- anceCompaniesCommitteeandtheLifeInsuranceAuditGuideTaskForceto assist practitioners in performing and reporting on their audit engagements, and to assist management in the preparation of their financial statements in conformity with U.S.generally accepted accounting principles (GAAP) and statutoryaccountingpractices. An AICPA Guide containing auditing guidance related to generally accepted auditing standards (GAAS) is recognized as an interpretive publication as defined in AU-C section 200, Overall Objectives of the Independent Auditor andtheConductofanAuditinAccordancewithGenerallyAcceptedAuditing Standards.1Interpretivepublicationsarerecommendationsontheapplication ofGAASinspecificcircumstances,includingengagementsforentitiesinspe- cializedindustries. AninterpretivepublicationisissuedundertheauthorityoftheAICPAAuditing StandardsBoard(ASB)afterallASBmembershavebeenprovidedanoppor- tunitytoconsiderandcommentonwhethertheproposedinterpretivepublica- tionisconsistentwithGAAS.ThemembersoftheASBhavefoundtheauditing guidanceinthisguidetobeconsistentwithexistingGAAS. Although interpretive publications are not auditing standards, AU-C section 200 requires the auditor to consider applicable interpretive publications in planningandperformingtheauditbecauseinterpretivepublicationsarerele- vanttotheproperapplicationofGAASinspecificcircumstances.Iftheauditor doesnotapplytheauditingguidanceinanapplicableinterpretivepublication, the auditor should document how the requirements of GAAS were complied withinthecircumstancesaddressedbysuchauditingguidance. TheASBisthedesignatedseniorcommitteeoftheAICPAauthorizedtospeak fortheAICPAonallmattersrelatedtoauditing.Conformingchangesmadeto theauditingguidancecontainedinthisguideareapprovedbytheASBChair (orhisorherdesignee)andtheDirectoroftheAICPAAuditandAttestStan- dardsStaff.Updatesmadetotheauditingguidanceinthisguideexceedingthat ofconformingchangesareissuedafterallASBmembershavebeenprovidedan opportunitytoconsiderandcommentonwhethertheguideisconsistentwith theStatementsonAuditingStandards(SASs). Any auditing guidance in a guide appendix or exhibit (whether a chapter or back matter appendix or exhibit), though not authoritative, is considered an "other auditing publication". In applying such guidance, the auditor should, exercisingprofessionaljudgment,assesstherelevanceandappropriatenessof 1 AllAU-CsectionscanbefoundinAICPAProfessionalStandards. ©2018, AICPA AAG-LHI iv such guidance to the circumstances of the audit.Although the auditor deter- minestherelevance ofother auditingguidance,auditingguidancein aguide appendix or exhibit has been reviewed by the AICPA Audit and Attest Stan- dardsstaffandtheauditormaypresumethatitisappropriate. TheFinancialReportingExecutiveCommittee(FinREC)isthedesignatedse- niorcommitteeoftheAICPAauthorizedtospeakfortheAICPAintheareasof financialaccountingandreporting.Conformingchangesmadetothefinancial accountingandreportingguidancecontainedinthisguideareapprovedbythe FinRECChair(orhisorherdesignee).Updatesmadetothefinancialaccount- ingandreportingguidanceinthisguideexceedingthatofconformingchanges are approved by the affirmative vote of at least two-thirds of the members of FinREC. Thisguidedoesthefollowing: (cid:2) IdentifiescertainrequirementssetforthintheFinancialAccount- ingStandardsBoard(FASB)AccountingStandardsCodification® (cid:2) (ASC). Describes FinREC's understanding of prevalent or sole industry practiceconcerningcertainissues.Inaddition,thisguidemayin- dicate that FinREC expresses a preference for the prevalent or soleindustrypractice,oritmayindicatethatFinRECexpresses apreferenceforanotherpracticethatisnottheprevalentorsole industrypractice;alternatively,FinRECmayexpressnoviewon (cid:2) thematter. Identifies certain other, but not necessarily all, industry prac- ticesconcerningcertainaccountingissueswithoutexpressingFin- (cid:2) REC'sviewsonthem. Provides guidance that has been supported by FinREC on the accounting,reporting,or disclosure treatment of transactions or eventsthatarenotsetforthinFASBASC. AccountingguidancefornongovernmentalentitiesincludedinanAICPAGuide isasourceofnonauthoritativeaccountingguidance.Asdiscussedlaterinthis preface,FASBASCistheauthoritativesourceofU.S.GAAPaccountingandre- portingstandardsfornongovernmentalentities,inadditiontoguidanceissued bytheSecuritiesandExchangeCommission(SEC). StatutoryAccountingPrinciplesapplicabletoU.S.insuranceentitiesarecodi- fiedintheNationalAssociationofInsuranceCommissioners's(NAIC)Account- ing Practices and Procedures Manual (manual).The manual is subject to an ongoingmaintenanceprocess.Allstateshaveadoptedthemanualasthepri- marybasisofprescribedSAPinthosestates.If,however,therequirementsof statelaws,regulations,andadministrativerulesdifferfromtheguidancepro- videdinthemanualorsubsequentrevisions,thosestatelaws,regulations,and administrativeruleswilltakeprecedence. AICPA Guides may include certain content presented as "Supplement," "Ap- pendix," or "Exhibit." A supplement is a reproduction,in whole or in part,of authoritative guidance originally issued by a standard setting body (includ- ing regulatory bodies) and applicable to entities or engagements within the purviewofthatstandardsetter,independentoftheauthoritativestatusofthe applicableAICPAGuide.Bothappendixesandexhibitsareincludedforinfor- mationalpurposesandhavenoauthoritativestatus. AAG-LHI ©2018, AICPA v Purpose and Applicability Thisguideisintendedtoapplytoalllifeandhealthinsuranceentitiesincluding stock,mutual,fraternal,andassessmententities.Thisguideisintendedtobe appliedtoalllifeandhealthentitiesthatcanissuelifeoraccidentandhealth insurance.This guide does not apply to governmental entities or to managed healthcareorganizations. Recognition 2018GuideEdition AICPASeniorCommittees AuditingStandardsBoard IleneKassman,ASBMember MikeSantay,Chair FinancialReportingExecutiveCommittee MichelleAvery,FinRECMember JamesDolinar,Chair TheAICPAgratefullyacknowledgesthefollowingindividualswhoreviewedor otherwisecontributedtothedevelopmentofthiseditionoftheguide:Jennifer Austin,BarbaraBartlett,DianneBatistoni,DanButtke,,ZachGietl,JasonJa- cobs,MarkJohnson,MargieKeeley,EricKegler,TomKivell,RobbieKnight,Joe Lee,BrittanieLehman,BenLeiser,BrigitteLenz,JeffMaffitt,MattMartinez, TriciaMatson,DoreenMcLaughlin, PhilPennino,ToddRoss,AndrewRouse, JimRichardson,AndrewSetz,JieShen,CarrieSmall,MargaretSpencer,John Sproull,AnneStevensandKyleStewart. AICPAStaff AhavaGoldman AssociateDirector AuditandAttestStandards KimKushmerick AssociateDirector AccountingStandards StaffLiaisontotheAICPAInsuranceExpertPanel InsuranceCompaniesCommittee 1998–1999 (memberswhenthiseditionwascompleted) PatrickJ.Shouvlin,Chair JamesJ.Butler JohnGreed DavidL.Holman R.LarryJohnson PatriciaL.Kubera EdwardR.Morrissey PeterW.Presperin BrianReilly KarenO'ConnorRubsam RobertSolitro DouglasStolte ©2018, AICPA AAG-LHI vi ChrisC.Stroup RichardWarren LifeInsuranceAuditGuideTaskForce 1998–1999 (memberswhenthiseditionwascompleted) WilliamJ.Chrnelich,Chair RobertJ.Giordano MarthaE.Marcon ThomasG.Schneider BennettTroxler Guidance Considered in This Edition ThiseditionoftheguidehasbeenmodifiedbytheAICPAstafftoincludecer- tainchangesnecessaryduetotheissuanceofauthoritativeguidancesincethe guide was originally issued and other revisions as deemed appropriate.Rele- vantguidanceissuedthroughAugust1,2018,hasbeenconsideredinthede- velopmentofthiseditionoftheguide.However,thisguidedoesnotincludeall audit,accounting,reporting,andotherrequirementsapplicabletoanentityor aparticularengagement.Thisguideisintendedtobeusedinconjunctionwith allapplicablesourcesofrelevantguidance. Relevantguidancethatisissuedandeffectiveforentitieswithfiscalyearsend- ingonorbeforeAugust1,2018,isincorporateddirectlyinthetextofthisguide. AuthoritativeguidanceissuedbutnotyeteffectiveasofAugust1,2018,butbe- comingeffectiveonorbeforeDecember31,2018,isalsopresenteddirectlyin thetextoftheguide,butshadedgrayandaccompaniedbyafootnoteindicating theeffectivedateofthenewguidance.Thedistinctpresentationofthiscontent isintendedtoaidthereaderindifferentiatingcontentthatmaynotbeeffec- tiveforthereader'spurposes(aspartoftheguide'sdualguidancetreatmentof applicablenewguidance). Relevantguidanceissuedbutnotyeteffectiveasofthedateoftheguideandnot becomingeffectiveuntilafterDecember31,2018,isreferencedinaguidance updatebox;thatis,aboxthatcontainssummaryinformationontheguidance issuedbutnotyeteffective. In updating this guide,all guidance issued up to and including the following wasconsidered,butnotnecessarilyincorporated,asdeterminedbasedonap- plicability: (cid:2) FASB Accounting Standards Update (ASU) No. 2018-11, Leases (cid:2) (Topic842)TargetedImprovements SAS No. 133, Auditor Involvement With Exempt Offering Docu- (cid:2) ments(AU-Csec.945) National Association of Insurance Commissioners Statement of StatutoryAccountingPrinciplesNo.107,AccountingfortheRisk- (cid:2) SharingProvisionsoftheAffordableCareAct PCAOB StaffGuidanceStaffGuidanceChangestotheAuditor's ReportEffectiveforAuditsofFiscalYearsEndingonorAfterDe- cember15,2017(PCAOBStaffGuidance,sec.300.04)2 2 AllPCAOBStaffGuidancesectionscanbefoundinPCAOBStandardsandRelatedRules. AAG-LHI ©2018, AICPA vii Usersofthisguideshouldconsiderguidanceissuedsubsequenttothoseitems listed previously to determine their effect on entities covered by this guide. Indeterminingtheapplicabilityofrecentlyissuedguidance,itseffectivedate shouldalsobeconsidered. The changes made to this edition of the guide are identified in the Schedule ofChangesappendix.Thechangesdonotincludeallthosethatmightbecon- sidered necessary if the guide were subjected to a comprehensive review and revision. PCAOBquotedcontentisfromPCAOBAuditingStandardsandPCAOBStaff AuditPracticeAlerts,©2015,PublicCompanyAccountingOversightBoard.All rightsreserved.Usedbypermission. FASBstandardsquotedarefromtheFASBAccountingStandardsCodification ©2015,FinancialAccountingFoundation.Allrightsreserved.Usedbypermis- sion. FASB ASC Pending Content Presentation of Pending Content in the FASB ASC AmendmentstoFASBASC(issuedintheformofASUs)areinitiallyincorpo- ratedintoFASBASCin"pendingcontent"boxesbelowtheparagraphsbeing amendedwithlinkstothetransitioninformation.Thependingcontentboxes aremeanttoprovideuserswithinformationabouthowtheguidanceinapara- graphwillchangeasaresultofthenewguidance. Pendingcontentappliestodifferententitiesatdifferenttimesduetovarying fiscal year-ends, and because certain guidance may be effective on different dates for public and nonpublic entities. As such, FASB maintains amended guidance in pending content boxes within FASB ASC until the roll-off date. Generally,theroll-offdateissixmonthsfollowingthelatestfiscalyearendfor whichtheoriginalguidancebeingamendedcouldstillbeapplied. Presentation of FASB ASC Pending Content in AICPA Audit and Accounting Guides Amended FASB ASC guidance that is included in pending content boxes in FASBASConAugust1,2018,isreferencedas"pendingcontent"inthisguide. Readersshouldbeawarethat"pendingcontent"referencedinthisguidewill eventuallybesubjectedtoFASB'sroll-offprocessandnolongerbelabeledas "pendingcontent"inFASBASC(asdiscussedinthepreviousparagraph). Terms Used to Define Professional Requirements in This AICPA Audit and Accounting Guide Any requirements described in this guide are normally referenced to the ap- plicable standards or regulations from which they are derived.Generally the termsusedinthisguidedescribingtheprofessionalrequirementsoftherefer- encedstandardsetter(forexample,theASB)arethesameasthoseusedinthe applicable standards or regulations (for example, must or should). However, where the accounting requirements are derived from FASB ASC, this guide uses should, whereas FASB uses shall. In its resource document "About the Codification" that accompanies FASB ASC,FASB states that it considers the ©2018, AICPA AAG-LHI viii termsshouldandshalltobecomparabletermsandtorepresentthesamecon- cept—therequirementtoapplyastandard. Readersshouldrefertotheapplicablestandardsandregulationsformorein- formation on the requirements imposed by the use of the various terms used todefineprofessionalrequirementsinthecontextofthestandardsandregula- tionsinwhichtheyappear. Certainexceptionsapplytothesegeneralrules,particularlyinthosecircum- stanceswheretheguidedescribesprevailingorpreferredindustrypracticesfor theapplicationofastandardorregulation.Inthesecircumstances,theappli- cable senior committee responsible for reviewing the guide's content believes theguidancecontainedhereinisappropriateforthecircumstances. Applicability of Generally Accepted Auditing Standards and PCAOB Standards AppendixA,"CouncilResolutionDesignatingBodiestoPromulgateTechnical Standards," of the AICPA Code of Professional Conduct recognizes both the ASBandthePCAOBasstandardsettingbodiesdesignatedtopromulgateau- diting,attestation,andqualitycontrolstandards.Paragraph.01ofthe"Com- plianceWithStandardsRule"(ETsec.1.310.001and2.310.001)3 requiresan AICPAmemberwhoperformsanaudittocomplywiththeapplicablestandards. Auditsofthefinancialstatementsofthoseentitiessubjecttotheoversightau- thority of the PCAOB (that is,those audit reports within the PCAOB's juris- diction as defined by the Sarbanes-Oxley Act of 2002,as amended) are to be conductedinaccordancewithstandardsestablishedbythePCAOB,aprivate sector,nonprofit corporation created by the Sarbanes-Oxley Act of 2002.The SEC has oversight authority over the PCAOB, including the approval of its rules,standards,andbudget.IncitingtheauditingstandardsofthePCAOB, references generallyusesectionnumberswithinthereorganizedPCAOBau- ditingstandardsandnottheoriginalstandardnumber,asappropriate. Auditsofthefinancialstatementsofthoseentitiesnotsubjecttotheoversight authorityofthePCAOB(thatis,thoseauditreportsnotwithinthePCAOB's jurisdictionasdefinedbytheSarbanes-OxleyActof2002,asamended)—here- inafterreferredtoasnonissuers—aretobeconductedinaccordancewithgen- erallyacceptedauditingstandards(GAAS)asissuedbytheASB.TheASBde- velops and issues standards in the form of SASs through a due process that includes deliberation in meetings open to the public, public exposure of pro- posedSASs,andaformalvote.TheSASsandtheirrelatedinterpretationsare codified in the AICPA's Professional Standards.In citing GAAS and their re- latedinterpretations,referencesgenerallyusesectionnumberswithinthecod- ificationofcurrentlyeffectiveSASsandnottheoriginalstatementnumber,as appropriate. The auditing content in this guide primarily discusses GAAS issued by the ASBandisapplicabletoauditsofnonissuers.Usersofthisguidemayfindthe tooldevelopedbythePCAOB'sOfficeoftheChiefAuditorhelpfulinidentify- ingcomparablePCAOBStandards.Thetoolisavailableathttp://pcaobus.org/ Standards/Auditing/Pages/FindAnalogousStandards.aspx. 3 AllETsectionscanbefoundinAICPAProfessionalStandards. AAG-LHI ©2018, AICPA
The list of books you might like
