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 that have been derecognized because of a sale or disposal of individual or a group of contracts or legal entities before the LDTI effective date.

Background:

The Board issued the amendments in Update 2018-12 in August 2018 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):

On July 14, 2022, the Board issued proposed Accounting Standards Update—Financial Services—Insurance (Topic 944): Transition for Sold Contracts. The due date for comment letters was August 8, 2022.

• Download the proposed Accounting Standards Update

Comment Letters:

Read the comment letters on the proposed Accounting Standards Update.

Read the press release on the proposed Accounting Standards Update.

Decisions Reached at Last Meeting (September 21, 2022):

The Board redeliberated the proposed Accounting Standards Update, Financial Services—Insurance (Topic 944): Transition for Sold Contracts. The proposed Update would allow an insurance entity to make an accounting policy election to exclude contracts that meet certain criteria from applying the amendments in Accounting Standards Update No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI), when they have been derecognized before the LDTI effective date.

Agenda Decisions

1. To 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 or disposed of before the effective date.
2. To limit the accounting policy election to contracts or legal entities that are derecognized due to sale or disposal before the effective date.
3. To limit the accounting policy election to contracts in which the insurance entity does not have certain forms of significant continuing involvement.
4. To require that an entity disclose if the accounting policy election was made and to provide a qualitative description of the transactions to which the insurance entity applied the accounting policy election.

The Board decided to allow insurance entities to apply the accounting policy election on a transaction-by-transaction basis. That is, an insurance entity may elect that an accounting policy election be applied at the sale or disposal transaction level as opposed to an entity-wide election.

Transition and Effective Date

The Board affirmed that the amendments in the final Update 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 an informed decision on the expected costs of applying the amendments in the final Update and that the expected benefits of the amendments would justify the expected costs.

Permission to Ballot and Next Steps

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

Tentative Board Decisions Reached to Date:

A summary of the Board’s tentative decisions reached to date can be found here.

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.
 

September 21, 2022*	Board Meeting—The Board redeliberated its proposed Accounting Standards Update. The Board directed the staff to draft a final Accounting Standards Update for vote by written ballot.
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 final Accounting Standards Update for vote by written ballot.

Tiffany Wyszkowski
Project Manager
twyszkowski@fasb.org

Katie Deakins
Postgraduate Technical Assistant
kdeakins@fasb.org

Natalie Vaughan
Postgraduate Technical Assistant
nvaughan@fasb.org