NAIC.APPM

Reading: Accounting Practices and Procedures Manual, Preamble, 2022

Author: NAIC

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Study Tips

The CAS syllabus citation for this article is confusing. The syllabus says this is a new reading, however, it actually isn't. The year of publication for the manual changes each year but the content of the article does not. Much of the content of this reading is discussed elsewhere in the syllabus (materiality, for example). There is a only a small amount to memorize.

Estimated study time: 1 hour (not including subsequent review time)

BattleTable

Based on past exams, the main things you need to know (in rough order of importance) are:

• preparing Fin Stmts - sources of information, materiality considerations
• codification of SAP - reasons

reference	part (a)	part (b)	part (c)	part (d)
E (2015.Spring #18)	codification of SAP: - reasons	preparing Fin Stmts: - source publications	preparing Fin Stmts: - alternate publications	preparing Fin Stmts: - materiality of errors

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In Plain English!

Codification Project:

• This project produced a comprehensive guide to SAP that provided a consistent and comprehensive basis of accounting and reporting.
• This guide is called the NAIC Accounting Practices and Procedures Manual and consists of the various SSAPs.
• The reasons for the codification of SAP are related to uniformity of reporting and are listed in part (a) of the 2015.Spring exam problem.

Statements of Statutory Accounting Principles (SSAPs):

• These principles constitute an accounting basis for the preparation of SAP statements where state regulations don't exist.
• The concepts underlying SSAPs are:

   - conservatism (estimates should be conservative to protect policyholders)

   - consistency (regulators need financial information that's comparable across companies)

   - recognition (solvency assessments are based on the balance sheet, the income statement is secondary)

Hierarchy of Accounting Rules: Higher levels take precedence over lower levels.

Level 1: SSAPs (which comprise the NAIC Accounting Practices and Procedures Manual)

Level 2: Emerging Accounting Issues Working Group

Level 3: NAIC Annual Statement Instructions

Level 4: SAP Statement of Concepts

Level 5: Sources of nonauthoritative GAAP accounting guidance & literature

(see parts (b) & (c) of the 2015.spring exam problem)

Deviations from NAIC APPM (Accounting Practices and Procedures Manual )

• If an insurer wants to deviate from APPM or state prescribed accounting practices, the regulator must provide notice 5 days in advance of approval to all states where the insurer is licensed.
• This notice must disclose:

   - description of the request

   - quantitative impact

The first quiz is regurgitation of the bullet points from above.

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The second quiz cover the old exam questions.

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Full BattleQuiz You must be logged in or this will not work.