A subscription-form demutualization does not by itself result in reclassification of retained earnings. Accounting for a distribution from an MIHC to its members. Because the members of an MIHC are also policyholders of the stock insurance subsidiary, a distribution by an MIHC to its members should be accounted for according to the substance of the transaction. Unless there are substantive independent third-party stockholders, the distribution should be accounted for as a policyholder dividend. This proposed SOP is effective for annual financial statements for years beginning after December 15, 2000.
Early adoption is encouraged.
The effect of initially applying this SOP should be reported retroactively through restatement of all previously issued financial statements presented for comparative purposes. The cumulative effect of adopting this SOP should be included in retained earnings in the earliest year restated. Expenses associated with a demutualization should be classified as a single line item in income from continuing operations in interim periods in the year of adoption. All other provisions of this SOP need not be applied in financial statements for interim periods in the year of initial application, but amounts reported for those interim periods shall be restated if they are reported with annual financial statements for that fiscal year.