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Frequently, insurance companies prepare and issue stand-alone GAAP separate account financial statements. Examples include:
  • Pooled and individual "separate accounts," e.g., real estate separate accounts established as investment vehicles for qualified retirement plans.
  • Variable annuity separate accounts.
  • Variable life insurance separate accounts.
Such stand-alone financial statements are subject to the guidance applicable to investment companies. See AICPA Audit and Accounting Guide for Investment Companies and ARM 9652 for guidance. Key elements of these financial statements include disclosure of the individual invested assets held at year-end, and investment performance for the year measured in terms of the change in contract holder unit values. Some separate account financial statements may include a significant amount of investments that are not publicly traded and have no readily determinable current market value. The more complex or illiquid the investments are, the greater the inherent uncertainty in management's estimated fair value. ASC 275-10-50, Risks and Uncertainties, requires management to include disclosure about significant estimates in the footnotes to the financial statements.
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