Entities subject to assessments shall recognize liabilities for insurance-related assessments when all of the following conditions are met: - a
Probability of assessment. An assessment has been imposed or information available before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25) indicates it is probable that an assessment will be imposed. - b
Obligating event. The event obligating an entity to pay (underlying cause of) an imposed or probable assessment has occurred on or before the date of the financial statements.
- c
Ability to reasonably estimate. The amount of the assessment can be reasonably estimated.
See Examples 1 through 3 (paragraphs
) for illustrations of the computation of assessment liabilities.
Premium-based guaranty-fund assessments, except those that are prefunded, are presumed probable when a formal determination of insolvency occurs, and presumed not probable before a formal determination of insolvency. For purposes of this Subtopic, a formal determination of insolvency occurs when an entity meets a state's (ordinarily the state of domicile of the insolvent insurer) statutory definition of an insolvent insurer. In most states, the entity must be declared to be financially insolvent by a court of competent jurisdiction. In some states, there must also be a final order of liquidation.
Administrative-type assessments are generally expensed in the period assessed.
An asset shall not be established for paid or accrued assessments that are recoverable through future premium rate structures.
Policy surcharges that are required as a pass-through to the state or other regulatory bodies shall be accounted for in a manner such that amounts collected or receivable are not recorded as revenues and amounts due or paid are not expensed (meaning, similar to accounting for sales tax).