Insurance

Financial Services—Insurance (Topic 944): Effective Date

Financial Services—Insurance (Topic 944): Transition for Sold Contracts

Financial Services-Insurance (Topic 944): Effective Date and Early Application

Exposure Draft - Proposed Accounting Standards Update 2022-003 —Financial Services —Insurance (Topic 944): Transition for Sold Contracts

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Financial Services—Insurance (Topic 944): Effective Date

Summary - The standard is effective immediately.

This ASU amends the effective date of ASU No. 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts to be: 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. 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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Financial Services—Insurance (Topic 944): Transition for Sold Contracts

Summary - The effective dates of the amendments in ASU No. 2022-05 are consistent with the effective dates of the amendments in ASU No. 2020-11.

These amendments amend the LDTI transition guidance to allow an insurance entity to make an accounting policy election on a transaction-by-transaction basis to exclude contracts that meet certain criteria from applying the amendments in ASU No. 2018-12. To qualify for the accounting policy election, as of the LDTI effective date both of the following conditions must be met:

The insurance contracts must have been derecognized because of a sale or disposal of individual or a group of contracts or legal entities.
The entity has no significant continuing involvement with the derecognized contracts.

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Financial Services-Insurance (Topic 944): Effective Date and Early Application

Summary - This ASU allows the delayed adoption date of ASU No. 2018-12, as noted in the "Effective Date" information at the left. And allows insurance companies to restate only one previous period, rather than two, if they choose to early adopt LDTI.

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Exposure Draft - Proposed Accounting Standards Update 2022-003 —Financial Services —Insurance (Topic 944): Transition for Sold Contracts

Summary - The FASB issued proposed Accounting Standards Update (ASU), Financial Services—Insurance (Topic 944): Transition for Sold Contracts. Comments on the proposed standard are due by August 8, 2022.

The amendments in ASU No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI), require an insurance entity to apply a retrospective transition method as of the beginning of the earliest period presented or the beginning of the prior fiscal year if early application is elected. The FASB received stakeholder feedback indicating that applying the LDTI guidance to contracts that were derecognized because of a sale or disposal of individual or a group of contracts or legal entities before the LDTI effective date likely would not provide decision-useful information to investors and other financial statement users and may result in significant operability challenges for insurance entities to apply the guidance.

As such, the FASB is issuing this proposed ASU to attempt to reduce implementation costs and complexity associated with the adoption of LDTI for contracts that have been derecognized because of a sale or disposal of individual or a group of contracts or legal entities before the LDTI effective date. Otherwise, an insurance entity would be required to reclassify a portion of the previously recognized gains or losses to the LDTI transition adjustment because of the adoption of a new accounting standard. Because there is no effect on an insurance entity’s future cash flows, such a reclassification could be misleading to financial statement users.

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