At the September 2020 meeting, the FASB Board discussed the feedback received on the proposed Accounting Standards Update No. 2018-12 with respect to the effective date and early adoption of the targeted improvements to the accounting for long-duration insurance contracts (LDTI or Topic 944). FASB decided to defer the effective date of the amendments in Accounting Standards Update No. 2018-12 for all insurance entities by one year. FASB also decided to amend the proposed early application provisions of Update 2018-12 whereby the early application transition date would be either the beginning of the prior period or the earliest period presented. As a next step, the Board has directed the staff to draft an Accounting Standards Update for vote by written ballot.
As per the proposal published on July 09, 2020, the Accounting Standards Update 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 for interim periods within those fiscal years.
- For all other entities, LDTI would be effective for fiscal years beginning after December 15, 2024 and for interim periods within fiscal years beginning after December 15, 2025.
FASB received 28 comment letters during the consultation period, which ended on August 24, 2020. All 28 respondents supported the proposed amendments to defer the effective date of the amendments in Update 2018-12 for all entities by one year. Respondents generally noted that the deferral would enable preparers to ensure a quality implementation of the amendments in Update 2018-12, work around delays caused by COVID-19 pandemic, and educate management and external users on the effects of adopting the new amendments. The 25 respondents that provided a view about the amendment in the proposed update on early application supported the proposed amendment to change the early application transition date guidance. Those respondents noted that it would achieve a more consistent transition date for all entities and encourage accelerated delivery of information to financial statement users for those entities in a position to early adopt. One respondent (that did not provide a view on the proposed amendments on early application) noted there may be unintended consequences of the early application transition date change proposed by the Board. One respondent also suggested that the Board consider shortening the period between the required smaller reporting company determination date (November 15, 2019) and the proposed effective date for the amendments in Update 2018-12, citing that an entity may change its designation before the effective date of the amendments in Update 2018-12 and still benefit from having a later effective date.
Keywords: Americas, US, Insurance, Accounting, Topic 944, LDTI, Insurance Contracts, Implementation Timeline, COVID-19, FASB
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