ACCOUNTING STANDARDS UPDATE 2022-05—FINANCIAL SERVICES—INSURANCE (TOPIC 944): TRANSITION FOR SOLD CONTRACTS
On December 15, 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2022-05, Financial Services—Insurance (Topic 944): Transition for Sold Contracts.
The amendments in the Update modify the application requirements of Accounting Standards Update No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI). The amendments in the Update amend the LDTI transition guidance to allow an insurance entity to make an accounting policy election on a transaction-by-transaction basis. An insurance entity may elect to exclude contracts that meet certain criteria from applying the amendments in Update 2018-12. To qualify for the accounting policy election, as of the LDTI effective date both of the following conditions must be met:
- The insurance contracts must have been derecognized because of a sale or disposal of individual or a group of contracts or legal entities.
- The entity has no significant continuing involvement with the derecognized contracts.
The effective dates of the amendments in the Update are consistent with the effective dates of the amendments in Update 2020-11, Financial Services—Insurance (Topic 944): Effective Date and Early Application. The effective dates are as follows:
- For public business entities that meet the definition of an 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.
- 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.
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