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Life Insurers May Get Accounting Rule Compliance Extension

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The Financial Accounting Standards Board (FASB) plans to give life insurers an extra year to implement an accounting standard that could lead to big swings in their quarterly and annual net results.

(Related: Accounting Rules Could Scare Some Life Insurers Private: S&P)

The Norwalk, Connecticut-based accounting standards group said Wednesday that its members have voted to issue a proposed accounting standards update related to the new standard. The proposed update would delay the implementation deadlines for the life insurance standards update, ASU 2018-12 Financial Services — Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts.

ASU 2018-12 would require insurers with contracts that last for many years, such as annuities, life insurance policies, disability insurance policies, and long-term care insurance policies, to recalculate the projected size of the contract liabilities every time they report earnings, and to include the changes in their net income or net loss figures.

“Stakeholders will have 45 days to review and provide comment on the proposed ASU, which the FASB expects to issue in the coming weeks,” FASB said.

Life insurers have been starting to implement a variety of “mark to market” rules, or requirements for putting fluctuations in the estimated value of assets or liabilities in their earnings, and the mark-to-market rules have led to life insurers reporting net income of $1 billion or more, and net losses of $1 billion or more, without the net results generating much apparent interest among investors or securities analysts.

FASB also noted that Russell Golden will be ending his seven-year term as the group’s chairman June 30.

Rich Jones is on track to take over as chairman July 1.

Golden noted Jones’ arrival in a statement about his own departure and asked colleagues and accounting rule stakeholders to support his successor.

In the statement, Golden thanked FASB members and the FASB staff.

“I also want to thank the international standard-setting community for working with the FASB to help improve accounting standards worldwide; the commissioners and staff of the U.S. Securities and Exchange Commission for their unwavering support of our mission; and U.S. stakeholders, whose willingness to share their views were critical to our ability to support more transparent capital markets with high-quality accounting standards,” Golden said.

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