FASB Releases Draft of Insurance Contracts Proposal
FASB released a staff draft of an Accounting Standards Update regarding potential changes to accounting for costs related to acquiring or renewing insurance contracts.
The draft applies to insurance organizations that are within the scope of Topic 944, which includes stock life insurance entities, mutual life insurance entities, and property and liability insurance entities that incur costs in the acquisition of new and renewal insurance contracts. The project focuses on the interpretation of whether costs related to the acquisition of new or renewal insurance contracts, such as advertising, underwriting, inspection and policy issuance and processing, qualify for deferral.
The draft reflects tentative conclusions made by FASB’s Emerging Issues Task Force. But the standard setter stressed that work on the project is continuing, and the proposals are subject to change before the EITF reaches a final consensus, which is expected at its Sept. 16 meeting, and FASB board members ratify that consensus and issue a final ASU.
The EITF is not formally soliciting comments on the staff draft. It published an exposure document on the project in December 2009.
The amendments would be effective for fiscal years, and interim periods within those years, beginning after Dec. 15, 2011, with early adoption permitted.
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