FASB Improves Certain Transition Requirements In Long-Duration Insurance Guidance

NORWALK, Connecticut, Dec. 16 (TNSres) -- The Financial Accounting Standards Board issued the following news:

The Financial Accounting Standards Board (FASB) today issued an Accounting Standards Update (ASU) that amends transition guidance in Accounting Standards Update No. 2018-12, Financial Services--Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (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.

In August 2018, the FASB issued ASU 2018-12 to improve, simplify, and enhance the financial reporting requirements for long-duration contracts issued by insurance entities. The amendments in Update 2018-12 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 feedback 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 allocators of capital and may result in significant operability challenges for insurance entities to apply the guidance.

To address this issue, the ASU amends the LDTI transition guidance to allow an insurance entity to make an accounting policy election to exclude certain contracts or legal entities from applying the LDTI guidance when, as of the LDTI effective date, (a) the insurance contracts have been derecognized because of a sale or disposal and (b) the insurance entity has no significant continuing involvement with the derecognized contracts.

The ASU is available at www.fasb.org.

* * *

Original text here: https://www.fasb.org/page/getarticle?uid=fasb_Media_Advisory_12-15-22