FASB issued a standard Thursday that provides relief for insurance companies implementing the board’s new standard for accounting for long-duration insurance contracts.
The board provided insurance companies adversely affected by the coronavirus pandemic an additional year to implement Accounting Standards Update (ASU) No. 2018-12, Financial Services — Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts.
Provisions included in the standard issued Thursday make it easier and more cost-effective for insurers that do not need the additional year to maintain their current timelines and implement the new insurance accounting standard.
“The new ASU has two purposes: first, to ensure a high-quality implementation … by permitting insurance companies impacted by the pandemic to take an additional year to apply the standard,” FASB Vice Chairman James Kroeker said in a news release. “And second, to reduce cost and complexity for insurance companies that remain on track to make a successful transition to the standard by the current effective date.”
The standard allows insurance companies to restate only one previous period, rather than two, if they choose to early adopt the long-duration insurance standard. For insurance companies that need extra time, the standard divides its implementation guidance as follows:
- For SEC filers, excluding smaller reporting companies as defined by the SEC, the long-duration insurance standard takes effect for fiscal years beginning after Dec. 15, 2022, and interim periods within those fiscal years.
- For all other entities, the long-duration insurance standard takes effect for fiscal years beginning after Dec. 15, 2024, and interim periods within fiscal years beginning after Dec. 15, 2025.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.