# ASC 805-944-S99: Business Combinations — Financial Services—Insurance — SEC 99 SEC Materials

Source: FASB Accounting Standards Codification, Basic View

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## ASC 805-944-S99: SEC 99 SEC Materials

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SEC content: yes

#### SEC Staff Guidance

##### [805-944-S99-1](https://asc.understandingaccounting.org/asc/805/944/#805-944-S99-1)

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The following is the text of SEC Observer Comment: Accounting by the Purchaser for a Seller's Guarantee of the Adequacy of Liabilities for Losses and Loss Adjustment Expenses Acquired in a Purchase Business Combination.

-   The SEC staff believes it is preferable to present the effects of the loss guarantee on a gross rather than net basis. Any receivable from the seller should not be netted against the related liability in the balance sheet or in supporting information such as footnotes or SEC Industry Guide 6 disclosures. The SEC staff also expressed a preference that (1) any expense associated with increased reserves be reported as a component of other claim losses and loss adjustment expenses and (2) other claim losses and loss adjustment expenses not be reduced by the effect of the reserve guarantee.
    
-   The SEC staff would not object to claim losses and loss adjustment expenses being reported net of the effect of the reserve guarantee in the income statement. A net presentation is appropriate only if the effects of the reserve guarantee are disclosed separately in the notes to the financial statements, in the SEC Industry Guide 6 disclosures including the reconciliation of claims reserves, and in the loss ratio information.