NEW YORK, NY (January 21, 2020) - The American Institute of CPA’s (AICPA) Financial Reporting Executive Committee (FinREC) has issued several working drafts of accounting issues for Insurance Entities, related to the implementation of FASB Accounting Standards Update (ASU) No. 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts, and is requesting feedback.
The new FASB accounting standard on Long-Duration Contracts makes targeted improvements to the existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by an insurance company. FinREC and the AICPA Insurance Expert Panel will continue to develop working drafts on accounting implementation issues that have been identified for the new standard.
The working drafts for implementation of ASU 2018-12 are available at:
- Issue #1: Claim liabilities associated with long duration traditional insurance contracts
- Issue #4AB: Market Risk Benefits - Considerations related to transition, including the use of hindsight and clarification on the application of the fair value framework of FASB ASC 820 to the initial and subsequent measurement of market risk benefits at fair value
- Issue #8: Updating cash flow assumptions in the net premium ratio
- Issue #9ABC: DAC amortization including:
- Considerations for evaluating whether the amortization on a constant-level basis for grouped contracts approximates straight-line amortization on an individual basis
- Interaction of the liability for future policy benefits cash flow assumption updates and DAC amortization assumption updates
- Updating of DAC experience as of the beginning of the period or end of period
Final issues for the project will be included in the Audit and Accounting Guide: Life and Health Insurance Entities.
The AICPA is seeking feedback from preparers of financial statements, practitioners, and other interested parties. Please submit informal feedback to Kim.Kushmerick@aicpa-cima.com by April 10, 2020.
About the Financial Reporting Executive Committee
The Financial Reporting Executive Committee (FinREC) is the senior committee of the Institute for financial reporting. It is authorized to make public statements on behalf of the Institute on financial reporting matters without the clearance of either the Council or the board of directors of the Institute and to clear statements of other committees that include references to financial reporting positions. The mission of FinREC is to determine the Institute's technical policies regarding financial reporting standards and to be the Institute's spokesbody on those matters, with the ultimate purpose of serving the public interest by improving financial reporting.