FASB Votes to Defer Effective Date of Long-Duration Contracts

More About | Insurance | COVID-19

On June 10, 2020, the Financial Accounting Standards Board (FASB) met to discuss a deferral of the effective date of Accounting Standards Update (ASU) No. 2018-12, Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. After extensive discussion, the FASB voted to defer the effective date for one year.

The FASB cited the main reasons for the delay related to the COVID-19 pandemic and concern that without a deferral, entities will take short-cuts in the implementation process. This would adversely impact the quality of the information provided. In addition, the FASB voted to amend early adoption provisions, which would begin the prior period, rather than the earliest period presented. The FASB’s amendments to ASU No. 2018-12 will be exposed for a 45-day comment period and are expected to be signed as soon as the comment period expires. The table below captures the proposed amendments and the impact it would have on large public insurance companies with calendar year-ends.

Source: Financial Accounting Standards Board, Board Meeting Handout, June 10, 2020
Standard Adoption
(assuming one-year deferral)
Early Adoption
Current requirement Staff-recommended improvement
Effective date 1/1/23 1/1/22 1/1/22
Transition date 1/1/21
(beginning of earliest period presented)
1/1/20
(beginning of earliest period presented)
1/1/21
(beginning of prior period)

Small reporting companies and non-public insurance entities also would receive a one-year deferral, resulting in an effective date of Jan. 1, 2025, with calendar year-end.

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