[14548]
March 18, 2002
TO: ACCOUNTING/TREASURERS COMMITTEE No. 10-02
RE: AICPA ISSUES TECHNICAL PRACTICE AID FOR SEPARATE ACCOUNTS
The AICPA recently issued a series of questions and answers intended to assist separate
accounts underlying variable annuity contracts prepare the financial highlights table. The series
of questions and answers, commonly referred to as Technical Practice Aids, provides guidance
on application of paragraphs 7.64-7.67 of the AICPA Audit and Accounting Guide, Audits of
Investment Companies to separate accounts underlying variable annuity contracts. The TPA
indicates that the accounting principles and auditing procedures discussed in the Audit Guide
apply to all investment companies and that separate accounts should provide the financial
highlights information in their financial statements.
The TPA indicates that separate accounts often have multiple accumulation unit values
that arise from having different product designs and fee structures on the variable contracts.
For example, it is not uncommon for separate accounts to have multiple sub-accounts (i.e.
portfolios), different products (i.e., variable annuities, variable life insurance) and multiple
combinations of elective contract benefits. For such accounts, the volume of financial highlights
information would be overwhelming if each contract variation were treated as a separate class.
The TPA indicates that differences in expense levels that result from customers’ selection of a
specific product within an array of products or elections of optional riders are not considered to
result in separate classes of units for purposes of preparing the financial highlights.
The TPA also provides guidance on calculation of per share or per unit data, and
reporting units issued and redeemed during the period.
The guidance is currently available on the AICPA’s web site1 and will be included in the
next edition of the AICPA’s Technical Practice Aids publication.
Gregory M. Smith
Director - Operations/Compliance & Fund
Accounting
1 See http://www.aicpa.org/members/div/acctstd/general/separate_accts.htm.