The FASB issues an Accounting Standards Update (ASU) that delays and eases early adoption provisions for long-duration insurance guidance to help insurance companies adversely affected by the COVID-19 pandemic by giving them an additional year to implement ASU No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI). For insurers that do not need the extra time, the ASU makes it easier and more cost-effective to maintain their current timelines and early adopt LDTI.
The new ASU on long-duration has two purposes:
-Ensure a high-quality implementation of LDTI guidance by permitting insurance companies impacted by the pandemic to take an additional year to apply the standard; and
-Reduces cost and complexity for insurance companies that remain on track to make a successful transition to the standard by the current effective date.
To facilitate early application and encourage accelerated delivery of better information to investors, the ASU allows insurance companies to restate only one previous period, rather than two, if they choose to early adopt LDTI.
For insurance companies that need extra time, the ASU permits them to delay implementation by one year as follows:
For SEC filers, excluding smaller reporting companies as defined by the SEC, LDTI is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. For all other entities, LDTI is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025.
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