Insurance—Effective Date

Accounting Standards Update 2019-09—Financial Services—Insurance (Topic 944): Effective Date

 

Overview


On November 15, 2019, the FASB issued an Accounting Standards Update that deferred the effective date of the amendments in Accounting Standards Update No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts.

Update 2018-12 was issued on August 15, 2018, and made targeted amendments to improve, simplify, and enhance the financial reporting requirements for long-duration contracts issued by insurance entities.

The Board received a technical agenda request to defer the effective date of the amendments in Update 2018-12 for public entities by one year.

Separately, the Board issued Accounting Standards Update No. 2019-09, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, on November 15, 2019. The Board developed a philosophy to extend and simplify how effective dates are staggered between larger public companies and all other entities. Under this philosophy, a major Update would first be effective for public business entities that are U.S Securities and Exchange Commission (SEC) filers, excluding entities eligible to be smaller reporting companies (SRCs) under the SEC’s definition. For all other entities, it is anticipated that the Board will consider requiring an effective date staggered at least two years after the effective date for public business entities that meet the definition of an SEC filer, excluding entities eligible to be SRCs.

The amendments in Update 2019-09 address the agenda request and apply the new philosophy on effective dates to the amendments in Update 2018-12. The new effective date for the amendments in Update 2018-12 is as follows:
  • For public business entities that meet the definition of an SEC filer, excluding entities eligible to be SRCs as defined by the SEC, the amendments in Update 2018-12 are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The one-time determination of whether an entity is an SRC should be based on an entity’s most recent determination as of November 15, 2019 (the issuance date of Update 2019-09), in accordance with SEC regulations. Early application of the amendments in Update 2018-12 is permitted.
  • For all other entities, the amendments in Update 2018-12 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early application of the amendments in Update 2018-12 is permitted.  

How Do the Amendments Improve Current Generally Accepted Accounting Principles (GAAP)?


The additional time to implement the amendments in Update 2018-12 will allow for a higher-quality implementation for insurance entities, which will improve the financial reporting for financial statement users once the amendments are effective.
 

Additional Information

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