AICPA - Audit and Accounting Guide: Life and Health Insurance Entities 2018 (AICPA Audit and Accounting Guide)

PREPARED BY THE INSURANCE COMPANIES COMMITTEE AND THE LIFE INSURANCE AUDIT GUIDE TASK FORCE

(Updated as of August 1, 2018)

This AICPA Audit and Accounting Guide was developed by the former Insurance Companies Committee and the Life Insurance Audit Guide Task Force to 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 statutory accounting practices.

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 and the Conduct of an Audit in Accordance with Generally Accepted Auditing Standards. Interpretive publications are recommendations on the application of GAAS in specific circumstances, including engagements for entities in specialized industries.

An interpretive publication is issued under the authority of the AICPA Auditing Standards Board (ASB) after all ASB members have been provided an opportunity to consider and comment on whether the proposed interpretive publication is consistent with GAAS. The members of the ASB have found the auditing guidance in this guide to be consistent with existing GAAS.

Although interpretive publications are not auditing standards, AU-C section 200 requires the auditor to consider applicable interpretive publications in planning and performing the audit because interpretive publications are relevant to the proper application of GAAS in specific circumstances. If the auditor does not apply the auditing guidance in an applicable interpretive publication, the auditor should document how the requirements of GAAS were complied with in the circumstances addressed by such auditing guidance.

The ASB is the designated senior committee of the AICPA authorized to speak for the AICPA on all matters related to auditing. Conforming changes made to the auditing guidance contained in this guide are approved by the ASB Chair (or his or her designee) and the Director of the AICPA Audit and Attest Standards Staff. Updates made to the auditing guidance in this guide exceeding that of conforming changes are issued after all ASB members have been provided an opportunity to consider and comment on whether the guide is consistent with the Statements on Auditing Standards (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, exercising professional judgment, assess the relevance and appropriateness of such guidance to the circumstances of the audit. Although the auditor determines the relevance of other auditing guidance, auditing guidance in a guide appendix or exhibit has been reviewed by the AICPA Audit and Attest Standards staff and the auditor may presume that it is appropriate.

The Financial Reporting Executive Committee (FinREC) is the designated senior committee of the AICPA authorized to speak for the AICPA in the areas of financial accounting and reporting. Conforming changes made to the financial accounting and reporting guidance contained in this guide are approved by the FinREC Chair (or his or her designee). Updates made to the financial accounting and reporting guidance in this guide exceeding that of conforming changes are approved by the affirmative vote of at least two-thirds of the members of FinREC.

This guide does the following:

Identifies certain requirements set forth in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC).

Describes FinRECs understanding of prevalent or sole industry practice concerning certain issues. In addition, this guide may indicate that FinREC expresses a preference for the prevalent or sole industry practice, or it may indicate that FinREC expresses a preference for another practice that is not the prevalent or sole industry practice; alternatively, FinREC may express no view on the matter.

Identifies certain other, but not necessarily all, industry practices concerning certain accounting issues without expressing FinRECs views on them.

Provides guidance that has been supported by FinREC on the accounting, reporting, or disclosure treatment of transactions or events that are not set forth in FASB ASC.

Accounting guidance for nongovernmental entities included in an AICPA Guide is a source of nonauthoritative accounting guidance. As discussed later in this preface, FASB ASC is the authoritative source of U.S. GAAP accounting and reporting standards for nongovernmental entities, in addition to guidance issued by the Securities and Exchange Commission (SEC).

Statutory Accounting Principles applicable to U.S. insurance entities are codified in the National Association of Insurance Commissionerss (NAIC) Accounting Practices and Procedures Manual (manual). The manual is subject to an ongoing maintenance process. All states have adopted the manual as the primary basis of prescribed SAP in those states. If, however, the requirements of state laws, regulations, and administrative rules differ from the guidance provided in the manual or subsequent revisions, those state laws, regulations, and administrative rules will take precedence.

AICPA Guides may include certain content presented as Supplement, Appendix, or Exhibit. A supplement is a reproduction, in whole or in part, of authoritative guidance originally issued by a standard setting body (including regulatory bodies) and applicable to entities or engagements within the purview of that standard setter, independent of the authoritative status of the applicable AICPA Guide. Both appendixes and exhibits are included for informational purposes and have no authoritative status.

This guide is intended to apply to all life and health insurance entities including stock, mutual, fraternal, and assessment entities. This guide is intended to be applied to all life and health entities that can issue life or accident and health insurance. This guide does not apply to governmental entities or to managed health care organizations.

2018 Guide Edition
AICPA Senior Committees

Auditing Standards Board
Ilene Kassman, ASB Member
Mike Santay, Chair

Financial Reporting Executive Committee
Michelle Avery, FinREC Member
James Dolinar, Chair

The AICPA gratefully acknowledges the following individuals who reviewed or otherwise contributed to the development of this edition of the guide: Jennifer Austin, Barbara Bartlett, Dianne Batistoni, Dan Buttke, , Zach Gietl, Jason Jacobs, Mark Johnson, Margie Keeley, Eric Kegler, Tom Kivell, Robbie Knight, Joe Lee, Brittanie Lehman, Ben Leiser, Brigitte Lenz, Jeff Maffitt, Matt Martinez, Tricia Matson, Doreen McLaughlin, Phil Pennino, Todd Ross, Andrew Rouse, Jim Richardson, Andrew Setz, Jie Shen, Carrie Small, Margaret Spencer, John Sproull, Anne Stevens and Kyle Stewart.

AICPA Staff

Ahava Goldman
Associate Director
Audit and Attest Standards

Kim Kushmerick
Associate Director
Accounting Standards
Staff Liaison to the AICPA Insurance Expert Panel