Accounting for Investments

What is accounting for investments?

Accounting for investments is the process of measuring the value of an investment to understand profit/loss, risk, and report on the organization’s overall income. Common accounting standards are Generally Accepted Accounting Principles (GAAP), Statutory Accounting (STAT), Tax Accounting (TAX), and International Financial Reporting Standards (IFRS). Global companies must often report under and comply with these standards.

GAAP are a common set of accounting principles, standards, and procedures that companies must follow when they report on their financial standing. United States GAAP represents the accounting standards set by the Financial Accounting Standards Board (FASB) and adopted by the U.S. Securities and Exchange Commission (SEC).

IFRS are a set of accounting standards developed by the International Accounting Standards Board (IASB), and they are quickly becoming the global standard for financial reporting for public companies.

Additionally, insurance companies in the US are required to follow Statutory Accounting Principles when preparing their financial statements and companies in Europe follow Solvency II.

Why is accounting for investments important?

Accounting for investments is crucial because companies are required to file their financial statements under their local regulatory requirements. As organizations increasingly invest globally in search of higher yield and their investments become more complex – think mortgages, derivatives, private equity – so do their investment accounting processes.

Many global organizations hold multiple currencies and asset classes, so they must also file under multiple accounting bases, increasing the amount of work needed. In addition, regulatory updates are far more frequent than ever before in response to the great financial crisis. It is now even more important that accountants keep up with and follow the latest guidance.

How does Clearwater Analytics help?

Clearwater provides an automated single instance, multi-basis, multi-currency, and multi-asset class platform that stays up to date on the latest regulatory guidance and does much of the heavy lifting for our clients when it comes to accounting for investments. Clearwater accounts for 15+ local GAAP rules, supports 40+ different currencies, 100+ asset classes, and is committed to increasing these numbers.

NAIC regulations are always being reviewed and updated. Many insurance companies rely on Clearwater to review regulations and adjust our reporting platform to adhere to the latest regulations so regulatory reporting is up-to-date and accurate. Clearwater experts attend each NAIC national meeting to parse through new guidelines and make any necessary changes for our clients.

Our web-based platform provides clients with a single view of all their assets, and the ability to track compliance with all applicable regulations in a matter of clicks – often only two. Clearwater proactively tracks emerging regulatory guidance and builds any reporting changes into the system seamlessly. Our teams also inform clients of any changes and how those updates might affect their accounting processes and portfolio.

More than 1,000 organizations have trusted Clearwater to collect their investment data, normalize it using our security master, and automate the delivery of critical reports and regulatory forms, turning this otherwise strenuous and tedious task into a growth tool for the business. Get started with Clearwater Analytics by scheduling time to speak to an expert today.

All data as of September 30, 2021