August 22, 2019
Published: The Accountant
The Financial Accounting Standards Board (FASB) has issued a proposed Accounting Standards Update (ASU) that would grant all insurance companies that issue long-duration contracts, such as life insurance and annuities, additional time to apply a standard that addresses this area of financial reporting.
On 15 August 2018, the FASB issued Accounting Standards Update No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The ASU made targeted amendments to improve, simplify, and enhance the financial reporting requirements for long-duration contracts issued by insurance companies.
However, FASB received an agenda request to delay its effective date by one year. In response, FASB members and staff conducted outreach with numerous insurance companies that issue and/or reinsure long-duration contracts to better understand their implementation challenges and progress.
FASB has adopted a new philosophy for determining how effective dates for major standards are staggered between larger public companies and all other entities. Under this philosophy, a major standard would first be effective for larger public companies; effective dates for all other public and private companies and organizations would be staggered at least two years later. Generally, it is expected that early application would continue to be permitted for all entities.
“Based on what we observed while monitoring implementation of the long-duration insurance standard—and consistent with our new philosophy to stagger effective dates between large publicly traded companies and all other companies and organisations—the FASB has proposed to grant all insurance companies at least one additional year to apply the standard,” stated FASB Chairman Russell G. Golden. “We believe it will result in a higher quality implementation for all.