Defining Issues | August 2018

FASB changes long-duration insurance accounting model

KPMG reports on ASU 2018-12, which changes how insurance entities recognize, measure, present and disclose long-duration contacts. Insurance entities should begin analyzing the implications of the standard throughout their organization.


ASU 2018-12

  • Insurance entities within the scope of US GAAP that issue long-duration contracts
  • Not applicable to policyholders of long-duration contracts
  • Not applicable to non-insurance entities

Relevant dates

Mandatory effective dates and early adoption provisions:

Effective date:

Annual periods – Fiscal years beginning after

Interim periods – In fiscal years beginning after

Public business entities

December 15, 2020

December 15, 2020

All other entities

December 15, 2022

December 15, 2022

Early adoption allowed? Yes.

Key impacts

  • Review the liability for future policy benefits cash flow assumptions for nonparticipating traditional long-duration and limited-payment contracts at the same time every year, and update if there is a change, unless experience suggests more frequent updates. Use an upper-medium grade (low-credit risk) fixed-income instrument yield for the discount rate and update each reporting period
  • Measure all market risk benefits at fair value
  • Amortize deferred acquisition costs on a constant level basis over the expected term of the related contracts
  • Improve the disclosures for liability for future policy benefits, policyholder account balances, market risk benefits, deferred acquisition costs, and separate account assets and liabilities

Report contents

  • Key facts
  • Liability for future policy benefits
  • Market risk benefits
  • DAC amortization
  • Enhanced disclosure requirements
  • Effective dates and transition



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