Financial Services-Insurance (Topic 944): Effective Date and Early Application
Exposure Draft - Proposed Accounting Standards Update 2022-003 —Financial Services —Insurance (Topic 944): Transition for Sold Contracts
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Financial Services-Insurance (Topic 944): Effective Date and Early Application
Summary - This ASU allows the delayed adoption date of ASU No. 2018-12, as noted in the "Effective Date" information at the left. And allows insurance companies to restate only one previous period, rather than two, if they choose to early adopt LDTI.
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© 2024 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
Exposure Draft - Proposed Accounting Standards Update 2022-003 —Financial Services —Insurance (Topic 944): Transition for Sold Contracts
Summary - The FASB issued proposed Accounting Standards Update (ASU), Financial Services—Insurance (Topic 944): Transition for Sold Contracts. Comments on the proposed standard are due by August 8, 2022.
The amendments in ASU No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI), require an insurance entity to apply a retrospective transition method as of the beginning of the earliest period presented or the beginning of the prior fiscal year if early application is elected. The FASB received stakeholder feedback indicating that applying the LDTI guidance to contracts that were derecognized because of a sale or disposal of individual or a group of contracts or legal entities before the LDTI effective date likely would not provide decision-useful information to investors and other financial statement users and may result in significant operability challenges for insurance entities to apply the guidance.
As such, the FASB is issuing this proposed ASU to attempt to reduce implementation costs and complexity associated with the adoption of LDTI for contracts that have been derecognized because of a sale or disposal of individual or a group of contracts or legal entities before the LDTI effective date. Otherwise, an insurance entity would be required to reclassify a portion of the previously recognized gains or losses to the LDTI transition adjustment because of the adoption of a new accounting standard. Because there is no effect on an insurance entity’s future cash flows, such a reclassification could be misleading to financial statement users.
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© 2022 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.