Accounting for Insurance Companies under ASC 944
Of all the industry-specific accounting requirements within U.S. GAAP, accounting for insurance companies under ASC 944 is arguably one of the most difficult. Insurance companies have unique challenges with different accounting models for different types of contracts under ASC 944, Financial Services – Insurance, GAAP vs. statutory accounting principles (SAP), reinsurance, and many more reasons! Is your head spinning? Fear not!
Insurance company (ASC 944) CPE training
Insurance is all about the spreading of risk. However, there is no risk in taking our insurance training! The GAAP Dynamics team has been teaching insurance industry courses for over ten years in the classroom as instructor-led training (ILT) for our clients and we’re now making this knowledge available virtually! It has been designed specifically for accountants and auditors of insurance companies. This collection of 10 eLearning courses, eligible for 12.5 CPE hours, will help you understand the fundamentals of the insurance industry. Below I’ll provide a brief overview of each course included in this collection dealing with accounting for insurance companies.
Insurance: Industry Overview
What exactly does an insurance company do? How do they make money? We answer these questions and more in this CPE-eligible, eLearning course (1.0 CPE). This online course begins with an explanation of insurance risk and insurable risks, before describing the difference types of insurers and the insurance contracts that these entities issue. It walks through the four core activities of insurers before discussing how an entity’s profitability is calculated. The course ends with an overview of the external reporting requirements for insurance companies, including a summary of the key differences between U.S. GAAP and statutory accounting principles. This is the course that lays the groundwork of the whole collection!
Insurance: Property and Casualty (P&C) Insurance
What is P&C insurance and what are the primary accounting and reporting issues associated with these contracts under U.S. GAAP? Look no further, this CPE-eligible, eLearning course (2.0 CPE) has you covered! From underwriting to claims, this online course walks you through the primary accounting and reporting concerns, providing you with a fundamental understanding of the accounting for short-duration insurance contracts under ASC 944.
ASC 944, Financial Services-Insurance, has unique accounting and reporting requirements for short-duration contacts as compared to long-duration contracts. Understanding the accounting for short-duration contracts, which make up most of the P&C insurance business, is essential for accountants in this industry. This insurance training covers accounting and reporting for premiums, acquisition costs, claims, reserves, and premium deficiencies. It concludes with a summary of the key differences between U.S. GAAP and statutory accounting principles (SAP).
ASU 2018-12, Long-Duration Insurance Contracts
ASU 2018-12, Targeted Improvements to Long-Duration Insurance Contracts (often referred to as “LDTI”) contains the guidance for accounting for long-duration insurance contracts. Life insurance contracts are an example of long-duration insurance contracts. This online, self-study course (0.5 CPE credit) provides you with an overview of the requirements. If you prepare or audit financial statements of insurance entities issuing long-duration insurance contracts, this course is for you!
Insurance: Reinsurance Contracts
Reinsurance is a financial transaction by which risk is transferred (ceded) from an insurance company (cedant) to a reinsurance company (reinsurer) in exchange of a payment (reinsurance premium). After discussing WHY entities enter such transactions, this CPE-eligible, eLearning course (1.0 CPE) provides examples of the various types and forms of reinsurance entered into by insurance companies. However, the accounting for reinsurance contracts under U.S. GAAP depends on whether risk is properly transferred from the cedant to the reinsurer, so we spend a fair amount of time on risk transfer, including providing you with a list of ”red flags” that may call into question whether risk has indeed transferred. This online course concludes with walking through the accounting for ceded and assumed reinsurance transactions, including those transactions that fail the risk transfer analysis.
Investments: Debt Securities
Many investment companies choose to hold debt securities in their portfolio. ASC 320, Investments – Debt Securities contains the guidance for debt securities. In this CPE-eligible eLearning course (1.5 CPE), we dive into the accounting for debt securities under U.S. GAAP, including the classification of debt securities as trading, available for sale, or held to maturity. We then walk through the initial recognition and subsequent measurement of debt securities based on their classification in accordance with ASC 320. You then learn about assessing impairment and recognizing credit losses on debt securities in accordance with ASC 326, Financial Instruments – Credit Losses. This online course concludes with a review of the disclosure requirements for debt securities.
Fair Value: Overview of ASC 820
Fair value is one of the most widespread financial concepts in U.S. GAAP – and it’s critical when it comes to accounting for insurance companies! After a review of the various balance sheet items which utilize fair value measurements, this CPE-eligible, eLearning course (1.5 CPE) explores key concepts of fair value including: Utilizing market participant assumptions, distinguishing between orderly transactions versus forced transactions, using exit prices and not entry prices, and determining the principal market. This online course then discusses the various approaches to determine fair value measurements, including the importance of inputs and their classification within the fair value hierarchy. The course concludes with a look at “real-life” fair value disclosures, highlighting the disclosure requirements within ASC 820.
Fair Value: Advanced Issues
After gaining a foundational understanding of fair value accounting in accordance with ASC 820, Fair Value Measurements, it’s time to take you knowledge to the next level! This eLearning course (1.5 CPE) dives into advanced fair value measurement issues. Level up your fair value measurement accounting knowledge with advanced topics such as distinguishing active, inactive, and disorderly markets, using net asset value (NAV) as a practical expedient to fair value, and considerations when determining the fair value of liabilities.
Derivatives: Characteristics and Scope Exceptions
Insurance companies must manage their risk. One strategy commonly used by insurers is to utilize derivative instruments to mitigate risks. After introducing derivatives, including common types of derivatives used by entities to manage risk, this CPE-eligible, eLearning course (1.0 CPE) covers basic derivative terminology, including the characteristic-based definition prescribed by ASC 815. You will learn about each of these three characteristics in detail, so that you can spot derivative contracts on your own. ASC 815 does have several scope exceptions to the basic standard, so we also spend some time learning about this area. You can put the knowledge from the fair value course above to use when it comes to derivatives. Why? Because that’s how derivatives are required to be accounted for in accordance with U.S. GAAP!
Credit Losses: Introduction to the CECL Model
Certain insurance contracts are in the scope of ASC 326, Financial Instruments – Credit Losses. In this CPE-eligible, eLearning course (1.5 CPE) we break down the key concepts of the current expected credit loss (CECL) model within ASC 326. Once we determine what instruments are within the scope of ASC 326, we launch into an overview of the initial recognition accounting, subsequent measurement, and required disclosures associated with the CECL model in accordance with ASC 326. This online course also covers the key considerations of forming an estimate of expected credit losses, as well as accounting for purchased credit deteriorated assets.
Insurance company (IFRS 17) CPE training
Complying with IFRS standards? Don’t worry, we didn’t forget about you! Our Insurance: Industry Overview course provides background information on the insurance industry regardless of what accounting and financial reporting framework you apply!
Our IFRS 17 Insurance Contracts: The Fundamentals eLearning course is dedicated to IFRS 17, Insurance Contracts. The 2.0 CPE eligible course provides accounting and finance professionals with a foundational understanding of IFRS 17. It focuses on the global standard governing insurance contracts. The course takes an engaging and practical approach to help participants ensure compliance and improve financial reporting accuracy. Participants will start by identifying contracts within the scope of IFRS 17. Guidance is provided on when contracts must be combined or separated for proper accounting.
The course explains the principles of recognition and measurement for insurance contracts. It emphasizes the application of IFRS 17’s key methodologies. It also covers financial statement presentation requirements, including essential disclosures and the proper structure of insurance-related financial reports.
These insights will help participants navigate the complexities of reporting under IFRS 17 with confidence. By completing this course, you’ll be ready to apply IFRS 17 to your organization’s insurance contracts.
Final thoughts
Whether you are trying to account for insurance contracts under U.S. GAAP or IFRS, we’ve got resources to help. As always, don’t hesitate to reach out to us with any questions about accounting for insurance companies and more!
About GAAP Dynamics
We’re a DIFFERENT type of accounting training firm. We view training as an opportunity to empower professionals to make informed decisions at the right time. Whether it’s U.S. GAAP, IFRS, or audit training, we’ve trained thousands of professionals since 2001, including at some of the world’s largest firms. Our promise: Accurate, relevant, engaging, and fun training. Want to know how GAAP Dynamics can help you? Let’s talk!
Disclaimer
This post is for informational purposes only and should not be relied upon as official accounting guidance. While we’ve ensured accuracy as of the publishing date, standards evolve. Please consult a professional for specific advice.
