FASB Proposes ASU on Long-Duration Contracts

Proposal

The FASB proposed an ASU on long-duration contracts today. The FASB issues 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. Stakeholders are encouraged to review and provide comment on the proposed ASU by September 20, 2019.

On August 15, 2018, the FASB issued ASU 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.

Since that time, the 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.

Furthermore, the FASB recently proposed an ASU that describes a new FASB philosophy for determining how effective dates for major standards are stagger 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, the FASB expects early application would continue to be permitted for all entities.

Proposed Effective Dates

The proposed ASU amends the effective dates for the long-duration insurance standard as follows:

-SEC Filers Other Than Smaller Reporting Companies: Changes from January 2021 to January 2022;

-Smaller Reporting Companies and All Other Public Business Entities: Changes from January 2021 to January 2024;

-All Others: Changes from January 2022 to January 2024.

The press release on this matter is available at:

https://www.fasb.org/cs/Satellite?c=FASBContent_C&cid=1176173220748&pagename=FASB%2FFASBContent_C%2FNewsPage&mc_cid=0e59925b69&mc_eid=2af63dab0c

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