PROJECT UPDATE

Financial Instruments—Insurance (Topic 944): Transition for Sold Contracts

Last updated on June 16, 2022. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Sections updated on the date above are indicated with an asterisk *)

 

Objective:


The objective of this project is to improve the transition provisions in Accounting Standards Update No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI), to remove the requirement to apply LDTI to contracts or legal entities sold before the effective date of LDTI.

Background:


In August 2018, the Board issued Update 2018-12, to improve, simplify, and enhance the financial reporting requirements for long-duration contracts issued by insurance entities. The effective dates of LDTI, as amended by Accounting Standards Update No. 2020-11, Financial Services—Insurance (Topic 944): Effective Date and Early Application, are as follows:

  1. For public business entities that meet the definition of a U.S. Securities and Exchange Commission (SEC) filer and are not smaller reporting companies, LDTI is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early application is permitted.
  2. 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. Early application is permitted.
The LDTI transition provisions require retrospective transition. Specifically, an insurance entity is required to apply LDTI guidance as of the beginning of the earliest period presented (or as of the beginning of the prior period, if early application is elected).

Exposure Draft(s):

There are no exposure documents at this time.

There are no media releases or educational materials at this time.

Decisions Reached at Last Meetings (June 15, 2022):


The Board decided to:

  1. Add a project to its technical agenda to address the application of the amendments in Update 2018-12 to contracts and legal entities sold before the effective date
  2. Amend the transition guidance for Update 2018-12 to include an accounting policy election for insurance entities to not apply that guidance to contracts or legal entities sold before the effective date
  3. Limit the accounting policy election to contracts or legal entities that are derecognized before the effective date and in which the insurance entity does not have certain forms of continuing involvement
  4. Require an entity to disclose if the accounting policy election was made.
Transition

The Board decided that the proposed amendments should be adopted concurrently with the adoption of the amendments in Update 2018-12, as amended by Accounting Standards Update No. 2020-11, Financial Services—Insurance (Topic 944): Effective Date and Early Application.

Cost-Benefit Analysis

The Board concluded that it has received sufficient information and analysis to make informed decisions on the expected costs of the amendments and that the expected benefits of the amendments would justify the expected costs.

The Board meeting minutes, handouts, and videos are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

The following are links to the minutes for each meeting.  To view Board meetings and handouts from the past 90 days, click here.
 
June 15, 2022* Board Meeting—The Board added a project to its technical agenda to address the application of the amendments in Update 2018-12 to contracts and legal entities sold before the effective date of LDTI. The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot.

The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot.

The Board decided on a 25-day comment period for the proposed Update.

Tiffany Wyszkowski
Project Manager
twyszkowski@fasb.org

Katie Deakins
Postgraduate Technical Assistant
kdeakins@fasb.org

Natalie Vaughan
Postgraduate Technical Assistant
nvaughan@fasb.org

The staff has prepared this summary for information purposes only. Any Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.
 

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