Which item is the third level in the hierarchy applying to accounting rules?

• A. SSAPs
• B. Consensus positions of the Emerging Accounting Issues Working Group
• C. SAP Statement of Concepts
• D. NAIC Annual Statement Instructions

Answer: (D)

There is a layered structure to statutory accounting guidance: the broad standards (the actual accounting principles) sit at the top, then interpretations that help apply those principles to specific issues, and finally the reporting framework that shows exactly how to present the numbers. The third level specifically consists of the NAIC Annual Statement Instructions, which convert the principles and their interpretations into concrete reporting requirements—defining line items, formats, definitions, and disclosures for the annual statement. So the annual statement instructions are the third level because they translate the principles and interpretations into the practical reporting framework insurers must use.