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FASB Releases Updated Guidance on Long-Term Insurance Policies

The Financial Accounting Standards Board’s (“FASB”) latest amendments impact companies that sell long-term insurance products such as life and disability insurance. Accounting Standards Update (“ASU”) No. 2018-12 – Financial Services —Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, changes how insurers and underwriters assess liabilities for long-term policies. Underwriters are now required to frequently update their assumptions to estimate payouts to customers and apply a standardized discount rate to calculate liabilities. When underwriting a customer’s policy, insurers previously had to lock in assumptions regarding a customer’s life expectancy or missed payments. The guidance meant liability estimates for long-term. Read More.

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FASB Discusses Improvements to Insurance Company-Issued Long-Duration Contracts

Deliberations continued last week on the Financial Accounting Standards Board’s (“FASB”) proposed Accounting Standards Update, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The proposal aims to improve financial reporting for long-duration contracts issued by insurance companies. In discussing the proposed standard, the FASB focused on the discount rate reset upon initial adoption, affecting the liability for future policy benefits for traditional and limited-payment contracts. The FASB decided to update the modified retrospective transition method discount rate, by which as of the transition date, an insurance company would maintain the discount rate assumption for calculating net premiums. Read More.

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FASB Makes Technical Corrections to Accounting Guidance

Amendments to key parts of U.S. GAAP were announced this week by the Financial Accounting Standards Board (“FASB”). Issued as Accounting Standards Update (“ASU”) No. 2016-19, Technical Corrections and Improvements, the amendments relate to several topics in the FASB Accounting Standards Codification. FASB Chairman Russell Golden says the changes are narrow in scope and should be easy for reporting entities to understand and implement. The following amendments in ASU No. 2016-19 impact all reporting entities: Subtopic 715-30, Compensation—Retirement Benefits—Defined Benefit Plans—Pension, and Subtopic 715-60, Compensation—Retirement Benefits—Defined Benefit Plans—Other Postretirement, and Topic 944, Financial Services—Insurance. ASU No. 2016-19 advises uniform use. Read More.

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