FASB sets effective date for accounting for long-duration insurance contracts

The FASB has directed its staff to proceed to a final standard for written ballot. The FASB decided on the effective date and revised the discount rate used at transition when applying the modified retrospective transition method for traditional and limited-payment insurance contracts.

Applicability

Proposed ASU on ASC 944

• 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

• FASB expects to issue a final ASU in August 2018

Key impacts

The FASB:

• Decided that insurance entities using the modified retrospective transition approach will not reset the discount rate as of the transition date to calculate net premiums and interest accretion for traditional and limited-payment insurance contracts
• Concluded that the benefits of the proposed ASU outweigh the implementation costs, and will proceed to a final standard for vote by written ballot
• Decided the effective dates