FASB Delays Implementation of Insurance Contracts Standard
FASB published an update to delay the long-duration insurance guidance by an additional year and to ease early adoption provisions to support companies adversely affected by COVID-19 pandemic. To this end, FASB issued the Accounting Standards Update No. 2020-11 to implement the earlier Accounting Standards Update No. 2018-12 on targeted improvements to the accounting for long-duration contracts or LDTI (Topic 944). However, for insurers that do not need the extra time, the Accounting Standards Update makes it easier and more cost-effective to maintain their current timelines and adopt the LDTI early.
For insurance companies that need extra time, the Accounting Standards Update permits them to delay implementation by one year as follows:
- For SEC filers, excluding smaller reporting companies as defined by the SEC, LDTI will be effective for fiscal years beginning after December 15, 2022 and for interim periods within those fiscal years.
- For all other entities, LDTI will be effective for fiscal years beginning after December 15, 2024 and for interim periods within fiscal years beginning after December 15, 2025.
To facilitate early application of LDTI, an entity that chooses early application may do so as of the beginning of the prior period presented or as of the beginning of the earliest period presented. For example, a large calendar-year public insurance entity could reflect LDTI as of January 01, 2021 (and record a transition adjustment as of that date) in its 2022 financial statements if the entity elects early application, or in its 2023 financial statements if the entity does not elect early application.
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Keywords: Americas, US, Accounting, Insurance, COVID-19, Insurance Contracts, Topic 944, LDTI, IFRS 17, Implementation Timeline, FASB
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