FASB Proposes Effective Date Delay for All Insurance Companies Applying Standard on Long-Duration Contracts
On August 15, 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.
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, last week, the FASB issued a proposed ASU that describes a new FASB 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 organizations—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.”
The proposed ASU would amend the effective dates for the long-duration insurance standard as follows:
The proposed ASU is available at www.fasb.org.