The Financial Accounting Standards Board on Thursday finalized an update to its standard on accounting for long-duration contracts at insurance companies that will delay the effective date and ease compliance burdens for early adopters.
The changes to Topic 944 (referred to as LDTI) were proposed back in July and prompted by the coronavirus pandemic. The standard update was issued following a comment period that concluded in August.
“The new ASU has two purposes: first, to ensure a high-quality implementation of LDTI guidance by permitting insurance companies impacted by the pandemic to take an additional year to apply the standard,” said FASB Vice Chairman James Kroeker in a press release. “And second, to reduce cost and complexity for insurance companies that remain on track to make a successful transition to the standard by the current effective date.”
The process for early adopters is designed to be streamlined by allowing insurance companies to restate only one previous period, rather than two, if they choose to early adopt.
The update delays by one year the effective date of Topic 944 for large Securities and Exchange Commission filers to fiscal years and interim periods within fiscal years beginning after Dec. 15, 2022. The effective date for all other entities is also pushed back to fiscal years beginning after Dec. 15, 2024, and interim periods within fiscal years beginning after Dec. 15, 2025.