Defining Issues | June 2022
Insight
The FASB tentatively decided to allow entities an accounting policy election to not apply the targeted improvements to the accounting for long-duration contracts standard to contracts or legal entities sold and derecognized before the effective date when the entity has no continuing involvement. The Board discussed how to define ‘no continuing involvement’ and clarify its intent within the guidance.
Applicability
Insurance entities in the scope of ASC 944 on accounting for long-duration contracts, excluding holders of insurance contracts and non-insurance entities.
Relevant dates
- June 15, 2022 – FASB Meeting
- Prior to September 30, 2022 – Expected issuance of final ASU
Effective date |
SEC filers, except smaller reporting companies1,2 |
Other entities |
Annual periods – Fiscal years beginning after |
Dec. 15. 2022 |
Dec. 15, 2024 |
Interim periods – In fiscal years beginning after |
Dec. 15, 2022 |
Dec. 15, 2025 |
Early adoption allowed? |
Yes. If early adoption is elected, the transition date is either the beginning of the prior period presented or the beginning of the earliest period presented. |
|
1. An SEC filer is an entity that is required to file or furnish its financial statements with either (1) the SEC or (2) with respect to an entity subject to Section 12(i) of the Securities Exchange Act of 1934, as amended, the appropriate agency under that Section. Financial statements for other entities that are not otherwise SEC filers whose financial statements are included with another filer’s SEC submission are not included in this definition. [Master Glossary] 2. A company’s determination about whether it is eligible to be a ‘smaller reporting company’ is based on its most recent filing determination in accordance with SEC regulations as of November 15, 2019. [944-40-65-2(a)] |
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Key impacts
At its June 15, 2022 meeting, the Board voted to issue a proposed ASU with a 25-day comment period that would:
- amend the transition provisions of its ASU on targeted improvements to the accounting for long-duration contracts to allow an accounting policy election to exclude contracts or legal entities sold and derecognized before the effective date when the entity has no continuing involvement; and
- require disclosure if the accounting policy election is made.
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