On September 30, the FASB affirmed its decision to defer the effective date of the long-duration contracts standard by one year.
The FASB has affirmed its decision to defer the effective date of the long-duration contracts standard by one year and to allow a choice of transition dates if early adoption is elected. A final Accounting Standards Update is expected later this fall.
At its September 30 meeting, the FASB affirmed its decision to defer the effective date of ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts, for one year in response to implementation challenges resulting from COVID-19. Calendar year-end SEC filers other than smaller reporting companies (SRCs) will be required to adopt ASU 2018-12 on January 1, 2023. Other calendar year-end entities will be required to adopt the ASU on January 1, 2025.
Early application will still be permitted. The final ASU will allow reporting entities that early adopt to elect as the transition date either (1) the beginning of the prior period presented (as described in the exposure draft) or (2) the beginning of the earliest period presented (as requested during the comment letter process).
All 28 comment letters received on the FASB’s July 9 exposure draft supported the proposed deferral. Commenters noted that the additional time would allow preparers to mitigate execution risk, address expected delays in implementation efforts resulting from the pandemic, and educate users of insurance company financial statements on the effects of adopting the new standard.
The deferral addresses the insurance industry’s concerns that the pandemic has limited their ability to devote necessary resources to effectively implement the new guidance. An additional year will allow insurers to devote resources to implement their envisioned modernization plans in connection with the adoption aimed at providing more useful, transparent information to investors and customers in the long term.
A final ASU addressing the revised effective dates is expected later this fall.
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