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Insurance Entities – AICPA Seeks Feedback on Insurance Entities Working Drafts NEW!

Life and Health Insurance Entities – AICPA Publishes Working Draft of Life and Health Insurance Entities Issues 

FASB Accounting Standards Updates - Accounting Standards Update No. 2019-09 —Financial Services —Insurance (Topic 944) —Effective Date

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Insurance Entities – AICPA Seeks Feedback on Insurance Entities Working Drafts

Summary - The AICPA’s Financial Reporting Executive Committee (FinREC) has issued for public comment several working drafts of accounting issues for Insurance Entities, related to the implementation of FASB Accounting Standards Update (ASU) No. 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts.

The new FASB accounting standard on Long-Duration Contracts makes targeted improvements to the existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by an insurance company. FinREC and the AICPA Insurance Expert Panel will continue to develop working drafts on accounting implementation issues that have been identified for the new standard.

The working drafts for implementation of ASU 2018-12 are:

  • Issue #9D: Deferred acquisition costs - Considerations for determining the expected term of the contract; and
  • Issue #11D: Upon adoption of FASB ASU 2018-12, whether it is permissible for an entity to change its accounting policy for all products for including the cost of reinsurance in loss recognition testing.
  • Final issues for the project will be included in the Audit and Accounting Guide: Life and Health Insurance Entities. Comments on the proposal are due by May 15, 2020.

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Life and Health Insurance Entities – AICPA Publishes Working Draft of Life and Health Insurance Entities Issues

Summary - The AICPA’s Financial Reporting Executive Committee (FinREC) has issued four working drafts of accounting issues for insurance entities. These working drafts provide guidance on implementation of FASB Accounting Standards Update (ASU) No. 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts.The comment due date for each working draft is April 10, 2020.

When final, the text of the working drafts will be included in the Audit and Accounting Guide: Life and Health Insurance Entities.

The new working drafts for implementation of ASU 2018-12 include:

  • Issue #1: Claim liabilities associated with long-duration traditional insurance contracts;
  • Issue #4AB: Market Risk Benefits - Considerations related to transition, including the use of hindsight and clarification on the application of the fair value framework of FASB ASC 820 to the initial and subsequent measurement of market risk benefits at fair value;
  • Issue #8: Updating cash flow assumptions in the net premium ratio; and
  • Issue #9ABC: DAC [Deferred Acquisition Costs] Amortization, including (a) considerations for evaluating whether the amortization on a constant-level basis for grouped contracts approximates straight-line amortization on an individual basis, (b) interaction of the liability for future policy benefits cash flow assumption updates and DAC amortization assumption updates, and (c) updating of DAC experience as of the beginning of the period or end of the period.

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© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Accounting Standards Updates - Accounting Standards Update No. 2019-09 —Financial Services —Insurance (Topic 944) —Effective Date

Summary - The FASB issued ASU No. 2019-09, Financial Services—Insurance (Topic 944): Effective Date, which finalizes insurance standard effective date delays for all insurance companies that issue long-duration contracts, such as life insurance and annuities. The change to the effective date is as follows:

Insurance (ASU No. 2018-12): For public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The one-time determination of whether an entity is eligible to be a smaller reporting company should be based on an entity’s most recent determination as of November 22, 2019, in accordance with SEC regulations. Early application is permitted.

For all other entities, for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early application is permitted.

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© 2020 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.