The NAIC approved SSAP 10R, a revised, temporary replacement of the income tax standard under SSAP 10. The revised standard is effective for year-end 2009 and year-end and interim 2010.
The NAIC revised this standard in order to be more in line with the Statutory Statement of Concepts of conservatism and transparency. The revisions are considered a change in accounting principle and will be accounted for as a cumulative effect adjustment to unassigned surplus as of December 31, 2009. If applicable and elected by company, these changes will require significant alterations to the companys deferred tax calculation under statutory accounting.
The main differences as a result of SSAP 10R are the concept of GAAP valuation allowance, reversal and carryback periods, increase in surplus limitation and additional disclosures.
GAAP Valuation Allowance Concept –
The addition of the valuation allowance concept applies to all companies. As under FAS 109 for GAAP reporting, the Company must consider if their gross deferred tax assets (DTA) will more likely than not (greater than 50 percent chance) be able to be realized. This concept must now be applied under statutory prior to the admissibility calculations.
Admissibility Changes
The most significant changes under SSAP 10R in admissibility are the following:
Eligibility If the company is subject to Risk Based Capital (RBC) requirements or files a RBC report then they may be allowed additional admitted DTA if their RBC level is above the following thresholds laid out in the new paragraph 10.d:
1.The risk based capital trend test (if subject to risk-based capital trend test); or
2.If not subject to risk-based capital trend test, the maximum risk-based capital level where an action level could occur as a result of a trend test (i.e. 250% for life/fraternal and 300% for P&C/health).
Reversal/Carryback Periods If the company is subject to RBC and meets one of the above thresholds, they may elect to follow paragraph 10.e to calculate additional admitted DTA. The calculation under 10.e starts with the net DTA from original SSAP 10 less any valuation allowance. The reversal periods now correspond with the IRS tax loss carryback provisions, not to exceed three years, based on the tax character of the temporary difference. For example, life companies are allowed to carryback tax losses three years so a life company would follow a three year reversal under paragraph 10.e.i (increased from the current one year reversal). Whereas a non-life company would follow a two year reversal. Capital tax items would use a three year reversal period since that is consistent with the capital loss carryback provisions. For purposes of the realization calculation and the with and without test, a three year period would apply regardless of character of temporary differences but can still only apply as the law allows (i.e. capital loss cannot offset non-capital income).
Surplus Limitation Increased The DTA admitted under 10.e.ii is limited to 15% of adjusted statutory capital and surplus, an increase from 10% under 10.b.ii.
Disclosure
SSAP 10R also requires several additional disclosures for all companies, regardless of whether the additional DTA admissibility applies.
The following are some of the additional disclosures required:
DTA must now be broken out by gross, adjusted gross, admitted and non-admitted;
DTA and DTL shown by tax character;
Statement as to if the company has elected to admit DTAs under 10.e;
Increased amount and change in amount of admitted adjusted DTA as a result of 10.e, by tax character;
Amount of admitted DTA, by tax character, calculated under each 10.a, 10.b.i, 10.b.ii, 10.c, 10.e.ii.a, 10.e.ii.b and 10.e.iii and the risk-based capital level used to determine if the company meet the required threshold; and
Amount of admitted DTA, admitted assets, statutory surplus and total adjusted capital used in the RBC calculation resulting from the calculation under 10.a, 10.b and 10.c and the increased amount of DTA, admitted assets, and surplus resulting from use of 10.e, if any.
Business accounting software solutions provide the most convenient way of keeping track of your companys financial information. However, finding the best accounting software program for your business can be a challenge. To choose an up to the mark accounting system solution package, there must be consideration on points like business accounting basics, the size and the structure of a business and its relevant accounting needs.
Below are the different kinds of accounting software categorized according to business types:
Small sized Companies
Affordable accounting software solutions in smaller ranges do exist. They start with minimal charges. Some of the popular options include QuickBooks, which is one of the big names in entry level accounting solutions. QuickBooks is tailor made for small sized businesses without extensive experience in accounting. The system installation takes few hassles and the running too is pretty easy that saves on the costs incurred by small business establishments.
Similar to QuickBooks, the popularly Peachtree is available in a number of variously priced forms. It is to be noted, Peachtree has a higher degree of flexibility in comparison to QuickBooks, thus reports and pie charts come much more easily– creating a lot of ease for accounting firms.
Fund E-Z is intended particularly for non profit set ups and has more flexible terms than either QuickBooks or Peachtree in the tracking of restricted funds and creation of nonprofit-specific report sheets.
For Midsized Companies
If you have an offshore based business or require monitoring of multiple programs, choose over and above entry level systems. Such packages, including those from Dubai IT solutions cost more than those discussed earlier. There are discounts available on bulk deals for deals that go long term. Understand the accounting volume and decide on the requirements before going in for a particular package.
For Large and International Non Profits
The software solution discussed above support the requirements of most non profit unitsunless there are a lot of funds available for use, multiple accounting users or an international level infrastructure. If that is the case, you will need enterprise Accounting Software Solutions custom made for your companys requirements. The prices of these packages tend to start with six figures. Dubai IT Solutions also offer plenty of choices in this category.
Therefore, it is ultimately the type of business that dictates the choice of the right type of accounting software. Choose your plans, based on the budget you have. Research and check the advantages of each system before going in for one. There are ample choices available for each separate company set up. Choose wisely!
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