On November 5, 2020, due to the effects of the COVID-19 pandemic, the FASB issued ASU 2020-11 Financial Services – Insurance (Topic 944), Effective Date and Early Application, which delays the updated long-term insurance standard’s effective date for one year.
Of the 28 comment letters received, overall unanimous support was given to defer ASU 2019-12’s effective date and to amend the guidance on the early application of long-duration contracts issued by insurance companies by one more year than had previously been amended by ASU 2019-09.
The FASB board has extended the effective dates of Accounting Standards Update No. 2018-12, Financial Services-Insurance (Topic 944) – Targeted Improvements to the Accounting for Long-Duration Contracts Issued by Insurance Companies. ASU 2020-11 directly impacts those insurance companies issuing long-term life insurance, disability income, long-term care, and annuity contracts. The Board contacted various insurance companies in the implementation process and received overwhelming suggestions to extend the enactment dates to achieve a higher quality product.
ASU 2020-11 extends the effective date of the amendments in ASU 2019-09 for all entities. For SEC filers, excluding smaller reporting companies (SRCs), the modifications in Update 2018-12 are effective for fiscal years beginning after December 15, 2021, and interim periods falling in those fiscal years. The definition of whether an entity is an SRC would be based on an entity’s most recent determination in accordance with SEC protocols as of the issuance of ASU 2020-11. For all other companies, the modifications in Update 2018-12 are now effective for fiscal years beginning after December 15, 2023, and interim periods falling in those fiscal years beginning after December 15, 2024. Early application of the ASU 2020-11 is permitted.
Chart source: FASB