The Financial Accounting Standards Board (FASB), due to the disruptions caused by the COVID-19 pandemic, has proposed giving insurance companies an extra year to adopt the standard on long-duration contracts.

The standard, Accounting Standards Update No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, introduced a number of changes when it was first approved two years ago. The update changed the rules on assumptions used to measure the liability for future policy benefits for traditional and limited-payment contract; measurement of market risk benefits; amortization of deferred acquisition costs; and disclosures.

The initial effective date was 2020, but last November, the FASB agreed to push it forward to 2021. Now, under the new proposal, the FASB aims to move it even further into the future. For SEC filers, excluding smaller reporting companies as defined by the SEC, the Long Duration Targeted Improvements standard (LDTI) would be effective for fiscal years beginning after Dec. 15, 2022, and interim periods within those fiscal years. For all other entities, LDTI would be effective for fiscal years beginning after Dec. 15, 2024, and interim periods within fiscal years beginning after Dec. 15, 2025.

“Some insurance companies expressed concerns about their ability to perform a quality implementation of LDTI while managing the effects of the COVID-19 pandemic,” noted FASB Vice Chairman James L. Kroeker. “The proposed ASU would provide these companies an additional year, while also reducing complexity for companies that remain on track to make a successful transition to the standard by their current effective date.”

Stakeholders are asked to review and provide comment on the proposed ASU by August 24, 2020.