Discussion:10% Statutory Limitation on Intangible Assets
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Discussion Forum Index --> Accounting Questions --> 10% Statutory Limitation on Intangible Assets
| 20 February 2009 | |
| Hello. An insurance company that is my client recently bought a book of business from a competitor for $10MM, exactly the amount determined by our actuary as the Value Of Business Acquired (VOBA); as part of the transaction, the selling insurance company transfered (by cutting a check payable to my client) $8MM to my client, which they had in their books as reserves associated with the book of business sold. The transaction is clear to me in terms of GAAP presentation. However, my clients's comptroller states that, because of SSAP 68, the $10MM intangible asset acquired must be limited in statutory B/S presentation to 10% of last year's Capital and Surplus, which amounted to $9MM, yielding a figure of only $900K; since the $7M reserves liability is recorded fully,this causes capital to be reduced by the $6.1MM difference. Am I correct in asserting that SSAP 68's 10% limitation only applies to goodwill, which is non-existent in this case, since my client's purchase price was exactly the VOBA acquired? If so, would it be correct to reflect $10MM completely for Statutory purposes, similar to GAAP? Thanks in advance, | |
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