Proposed statement of position : financial highlights of separate accounts : an amendment to the audit and accounting guide audits of investment companies;Financial highlights of separate accounts : an amendment to the audit and accounting guide audits of investment companies
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This Statement of Position (SOP) provides guidance on reporting financial highlights by separate accounts of insurance enterprises. This SOP requires, among other things, the following: Disclosure of ranges. Separate accounts with more than two levels of contract charges or net unit values per subaccount may elect to present the required financial highlights for contract expense levels that had units issued or outstanding during the reporting period (including number of units, unit fair value, net assets, expense ratio, investment income ratio, and total return) for either: 1. Each contract expense level that results in a distinct net unit value and for which units were issued or outstanding during the reporting period; or 2. The range of the lowest and highest level of expense ratio and total return, and the related unit fair values during each reporting period. The financial highlights table in the separate account's financial statements should state clearly that the expense ratio considers only the expenses borne directly by the separate account and excludes expense incurred indirectly by the underlying funds or charged through the redemption of units. The disclosure should include ranges of all fees that are charged by the separate account and whether those fees are assessed as direct reductions in unit values or through the redemption of units. Expense ratio. The expense ratio represents the annualized contract expenses of the separate account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying fund are excluded. The financial highlights note should also provide disclosure of the ranges of all charges assessed to the separate account, including discussion of the manner in which the charges are assessed. Total return ratio. The total return ratio represents the total return for the periods indicated, including changes in the value of the underlying fund, which reflects the reduction of unit value for expenses assessed. The ratio does not include any expenses assessed through the redemption of units. The total return is calculated for the period indicated or from the effective (fund inception) date through the end of the reporting period. Investment income ratio. The investment income ratio represents the dividends, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund(s) in which the subaccounts invest. This SOP is effective for annual financial statements issued for fiscal years ending after December 15, 2003, and for interim financial statements issued after initial application. Presentation of previously issued financial highlights on a comparable basis is permitted, but not required. The provisions of this SOP should be applied prospectively from the beginning of the year of adoption.
Mutual funds -- Accounting -- Standards -- United States
Accounting | Taxation
American Institute of Certified Public Accountants. Accounting Standards Executive Committee, "Proposed statement of position : financial highlights of separate accounts : an amendment to the audit and accounting guide audits of investment companies;Financial highlights of separate accounts : an amendment to the audit and accounting guide audits of investment companies" (2003). Statements of Position. 306.