The Financial Accounting Standards Board (FASB) is giving life insurers an extra year to shift to an accounting standard that could lead to big swings in net earnings.
- A copy of the FASB accounting standards update is available here.
- An article about the original FASB benefits rule delay proposal is available here.
The Norwalk, Connecticut-based accounting standards group said last week that it has approved an update for Accounting Standards Update 2018-12 Financial Services — Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts.
The FASB update will give big, publicly traded life insurers until fiscal years starting after Dec. 15, 2022, to implement the new accounting rules.
The latest update will give other life insurers until fiscal years beginning after Dec. 15, 2024, and quarters within fiscal years beginning after Dec. 15, 2025, to comply with the new rules.
To make compliance easier for life insurers that stick to the original implementation standard, FASB is letting insurers that adopt the new standards early apply the new rules to just one previous reporting period, rather than applying the new rules to two previous reporting periods.
FASB has provided the new implementation schedule in Accounting Standards Update 2020-11.
ASU 2018-12 requires insurers with contracts that last for many years — such as annuities, life insurance policies, disability insurance policies, and long-term care insurance policies — to come up with an estimate of the value of the benefits promised every time they report their earnings. Insurers are supposed to put the changes in their net income or net loss figures.