BA asset dissolution

[AccountingS-GHC]

At the prior year-end, we reported a fully-owned subsidiary LLC as a BA asset. As of 12/31/2018, the subsidiary was dissolved and its assets and liabilities were incorporated into our books.

SSAP 3 paragraph 12 says, "For mergers, prior years' amounts in the Annual Statement shall be restated as if the merger had occurred as of January 1 of the prior year."

In accordance with SSAP 48, we had been recording the cumulative earnings of the LLC as an unrealized gain/loss within surplus. Since the LLC no longer exists, obviously we would no longer carry an unrealized gain/loss. But I can't quite tell if the entire cumulative gain/loss should be realized - that is, in investment income? Or would it be more appropriate to realize only the 2018 portion of the cumulative gain/loss within investment income, and treat the prior-year portion as a reclass within surplus between unrealized gain/loss and cumulative accounting changes?

I hope this question makes some amount of sense. Please let me know if I can clarify anything.

Thanks for your help.

[Russ]

We believe that the unrealized gain or loss should be reversed in its entirety. The entry to record the merger of this subsidiary should include a debit or credit entry to unassigned surplus for the cumulative retained earnings of the subsidiary (effectively recording the prior unrealized gain or loss).

Not sure that restating prior year's financial statements is necessary if the merger of the LLC is immaterial to your company's financial statements.

[AccountingS-GHC]

Thanks - just following up on this. So there would be a change in the unrealized gain/loss (page 5 line 36), and an offsetting change in aggregate write-ins for gains or losses in surplus (page 5 line 47), and no impact on income? Is that what you're saying? Thanks again.

[AccountingS-GHC]

I realized my question might be confusing. We already recorded an entry to remove the BA asset from the books and bring on the individual assets and liabilities and P&L items from the subsidiary in exchange. That entry didn't touch the unrealized gain/loss within surplus. I still need to zero that out, and my question is, what would the other side of that entry be? Thanks.

[Russ]

Yes, that is correct.