FASB issues proposed ASU extending implementation deadline for insurance companies applying standard on long-duration contracts

On Aug. 21, 2019, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update (ASU) which, if approved, would delay the effective dates of ASU No. 2018-12, “Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts” for all insurance companies. ASU No. 2018-12 makes targeted amendments to improve, simplify and enhance the financial reporting requirements for long-duration contracts issued by insurance companies. Comments related to the proposed delay are due by Sept. 20, 2019.

If the proposed ASU is approved, its new effective dates would be as follows:

• Public business entities (PBEs) other than smaller reporting companies (SRCs) – fiscal years beginning after Dec. 15, 2021 (i.e., Jan. 1, 2022 for calendar year-ends)
• SRCs and all other PBEs –  fiscal years beginning after Dec. 15, 2023 (i.e., Jan. 1, 2024 for calendar year-ends)
• All other entities – fiscal years beginning after Dec. 15, 2023 (i.e., Jan. 1, 2024 for calendar year-ends)

This proposed delay follows a new philosophy outlined by the FASB in a similar proposed ASU (to extend the implementation deadline for leases, credit losses and hedging standards) that would extend and simplify how effective dates are determined for major standards. This new philosophy would separate entities into two groups: large public companies and all other entities. The “all other entities” group would include private companies, smaller public companies, not-for-profit organizations and employee benefit plans. Under this new philosophy, the FASB would consider allowing the “all other entities” group at least two additional years to adopt major standards. 

For more information on this deal, or to learn how Baker Tilly insurance specialists can help, contact our team.