Related Party Asset Transfer

[EricS-AMIC]

Hello,

Trying to understand the implications of economic vs. non-economic transfers of invested assets according to SSAP No. 25. As i understand it:

1. As long as the transfer can be deemed economic, the buying entity would record at FV and the selling entity would recognize a gain or loss
2. In the case on a non-economic transfer, the buying entity would record at lower of FV or book value, and would the selling related party defer any gain/loss recognition?

Looking at this in the context of partnership investments may get tricky, since the parent may still have "indirect" control of any partnership interest transferred as the subsidiary is under common ownership.

Curious if any other companies have experience with transfers of invested assets between related party insurance companies.

Thanks.

[Lisa]

Eric,
SSAP 25 Related Parties, paragraphs 15 through 17 addresses the accounting for economic and noneconomic related party transactions.

Due to the complexities of related party transactions, it is difficult to assess the appropriate accounting treatment with the general facts outlined in your question. You may want to review the accounting treatment of your specific transactions with your auditor.

Below are a few observations from the guidance.

It does not appear immediate gain recognition for economic transactions is always appropriate. Please refer to paragraphs 15 and 17a.

Paragraphs 15, 17b. and c. addresses the accounting for noneconomic transactions. The the guidance discusses how the parent reporting entity should defer the net effects of any gain or increase in surplus.


Thanks
Lisa Mullen
Regulatory Education Director at Sovos