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.
The FASB encouraged stakeholders to review and provide comment on the proposed ASU by September 20, 2019.
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 or reinsure long-duration contracts to better understand their implementation challenges and progress.
Furthermore, the FASB also has 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 the FASB's chair, Russell G. Golden. "We believe it will result in a higher quality implementation for all."
The proposed ASU is available at www.fasb.org.
Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].