The Financial Accounting Standards Board (FASB) on Nov. 15, 2018, plans to hold an educational webinar to review the accounting changes to long-term insurance policies published in August.
The webinar is slated to cover the history of the FASB’s insurance accounting project, how it will usher in changes to the recognition, measurement and disclosure requirements in U.S. generally accepted accounting principles (GAAP). The FASB also wants to explain how insurers are expected to make the transition to the new accounting.
The webinar is scheduled to feature presentations from FASB member Christine Botosan, senior project manager Alex Casas and project manager Jay Shah, the accounting board said.
The FASB published Accounting Standards Update (ASU) No. 2018-12, Financial Services —Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, after a decade of work to improve an area of accounting that is considered complex to all but the most seasoned accountants. The update requires companies offering long-term insurance products, such as life, annuities, long-term health care and disability insurance, to annually review the assumptions they make about their policyholders and update the assumptions when there are changes to the data on which the assumptions are based. The result, the FASB says, will more accurately reflect the economics of long-term insurance policies and give a clearer picture of insurance companies’ liabilities.
The update calls for three other main changes: it attempts to simplify the way insurers amortize the cost of acquiring new customers, it adds a bevy of new disclosure rules about the assumptions insurers use to measure their liabilities and how they may affect future cash flows, and it requires fair value measurement of what the FASB calls market risk benefits — insurance policies with features that protect customers from losses.
The update is effective for public companies beginning after Dec. 15, 2020, which means 2021 for most calendar-year companies. Private companies will have an extra year to comply.
The FASB labeled ASU No. 2018-12 as a set of “targeted” improvements to U.S. GAAP, but many financial reporting professionals consider the changes to be wide-ranging. The American Council of Life Insurers has asked the FASB to consider giving insurers more time to comply with the new accounting standard.
For more information on this topic, or to learn how Baker Tilly accounting and assurance specialists can help, contact our team.
We have partnered with Thomson Reuters to issue our monthly Accounting insights. Please feel free to contact Baker Tilly at email@example.com if you have any questions related to these articles or Baker Tilly's Accounting and Assurance Services. © 2018 Thomson Reuters/Tax & Accounting. All Rights Reserved.