FASB Issues Proposal to Delay Long-Duration Insurance Standard and Ease Early Adoption Provisions
Norwalk, CT—July 9, 2020—The Financial Accounting Standards Board (FASB) today issued a proposed Accounting Standards Update (ASU) that would help insurance companies adversely affected by the COVID-19 pandemic by giving them an additional year to implement Accounting Standards Update No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI). However, for insurers that may not need the extra time, the proposal would make it easier and cost-effective to maintain their current timelines and early adopt LDTI. Stakeholders are asked to review and provide comment on the proposed ASU by August 24, 2020.
“Some insurance companies expressed concerns about their ability to perform a quality implementation of LDTI while managing the effects of the COVID-19 pandemic,” noted FASB Vice Chairman James L. Kroeker. “The proposed ASU would provide these companies an additional year, while also reducing complexity for companies that remain on track to make a successful transition to the standard by their current effective date.”
To facilitate early application and encourage accelerated delivery of better information to investors, the proposed ASU would allow insurance companies to restate only one previous period, rather than two, if they choose to early adopt LDTI.
The proposed ASU would permit insurance companies to delay implementation by one year as follows:
- For SEC filers, excluding smaller reporting companies as defined by the SEC, LDTI would be effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.
- For all other entities, LDTI would be effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025.