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.
Keywords: Americas, US, Accounting, Insurance, COVID-19, Insurance Contracts, Topic 944, LDTI, IFRS 17, Implementation Timeline, FASB
Previous ArticleESMA Consults on Disclosure Obligations Under Taxonomy Regulation
APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).
The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).
The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.
The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.
The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.
Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.
EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.
The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.