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Long-Duration Insurance Contracts Accounting Standard Delayed

11.19.2019

In October, the FASB officially deferred the implementation of ASU No. 2018-12, Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The Accounting Standard Update has been delayed for both public and private companies. This deferral is effective for SEC filers, other public business entities, smaller reporting companies and private and nonprofit entities. The deferral schedule is as follows:

 

 

Original Effective Date

 

Deferral Period

 

Revised Effective Date

SEC Filers

January 2021

1 year

January 2022

Other Public Business Entities and Smaller Reporting Companies

January 2021

3 years

January 2024

Private and Nonprofit Companies

January 2022

3 years

January 2024


The changes, which are meant to provide investors and other financial statement users with better, more easily understandable information on their investments, target four key areas:

  • The timeliness of recognizing changes in the liability for future policy benefits and the rate used to discount future cash flows
  • Accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts
  • Amortization of deferred acquisition costs
  • The effectiveness of the required disclosures

The deferral of the standard will give software vendors additional time to modify their systems to support the new reporting models. The delay will also give insurance companies time to educate the sector and put new systems in place effectively.

To learn more about this accounting standard update and the implementation of this guidance, contact Kyle Dodwell, Audit Manager, at kdodwell@bswllc.com or 314.983.1388.

Team

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