FASB Improves Accounting Guidance for Insurance Companies That Issue Long-Duration Contracts
“The new ASU provides investors and other financial statement users with better and more timely and transparent information about long-term contracts issued by insurance companies,” stated FASB Chairman
That outreach included more than 150 meetings with users and more than 250 meetings with preparers, auditors, industry groups, and others; 13 group meetings with 60 users; 14 conferences with more than 150 users; more than 450 comment letters from users, preparers, auditors, industry groups, and others; 13 public roundtables hosted or attended by the Board or staff; and numerous additional discussions.
To improve this area of financial reporting, the new ASU:
- Requires updated assumptions for liability measurement. Assumptions used to measure the liability for traditional insurance contracts, which are typically determined at contract inception, will now be reviewed—and, if there is a change, updated—at least annually, with the effect recorded in net income.
- Standardizes the liability discount rate. The liability discount rate will be a standardized, market-observable discount rate (upper-medium grade fixed-income instrument yield), with the effect of rate changes recorded in other comprehensive income.
- Provides greater consistency in measurement of market risk benefits. The two previous measurement models have been reduced to one measurement model (fair value), resulting in greater uniformity across similar market-based benefits and better alignment with the fair value measurement of derivatives used to hedge capital market risk.
- Simplifies amortization of deferred acquisition costs. Previous earnings-based amortization methods have been replaced with a more level amortization basis.
- Requires enhanced disclosures. They include rollforwards and information about significant assumptions and the effects of changes in those assumptions.
For calendar-year public companies, the changes will be effective in 2021. For all other calendar-year companies, the changes will be effective in 2022. Early adoption is permitted.
The ASU, as well as a FASB in Focus overview, an Understanding Costs and Benefits document, and an educational video, is available at www.fasb.org.
About the
Established in 1973, the FASB is the independent, private-sector organization, based in
View source version on businesswire.com: https://www.businesswire.com/news/home/20180815005155/en/
[email protected]
Source:
Sen. Tina Smith holds off Richard Painter, will face Karin Housley in historic matchup
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News