FASB ISSUES PROPOSED CHANGES TO ACCOUNTING GUIDANCE FOR LONG-DURATION CONTRACTS ISSUED BY INSURANCE COMPANIES
Norwalk, CT, September 29, 2016—The Financial Accounting Standards Board (FASB) today issued a proposed Accounting Standards Update (ASU)
intended to improve financial reporting for insurance companies that
issue long-duration contracts, such as life insurance, disability
income, long-term care, and annuities. Stakeholders are encouraged to
review and provide comments on the proposed ASU by December 15, 2016.
"During outreach on our project to consider potential improvements to
the insurance accounting model, stakeholders identified specific areas
of financial reporting related to long-duration contracts that could be
improved," stated FASB Chairman Russell G. Golden. "Based on that
feedback, the Board developed the proposed ASU, which sets forth
recommended, targeted improvements to enhance the quality of information
provided to investors about these contracts."
The Exposure Draft contains proposals for improving insurance accounting by:
To elicit additional feedback on its proposals, the Board plans to hold
public roundtable meetings in the first quarter of 2017. Those
interested in participating are asked to submit written comments on the
proposed ASU by Thursday, December 15, 2016.
- Improving the timeliness of recognizing changes in the liability
for future policy benefits by requiring that updated assumptions be
used to measure the liability
- Eliminating the usage of an asset rate (that is, an insurance
company's expected investment yield) to discount liability cash flows,
and instead requiring that cash flows be discounted at a high-quality
fixed-income instrument yield
- Simplifying and improving the accounting for certain options or
guarantees in variable products (such as guaranteed minimum death,
accumulation, income, and withdrawal benefits) by requiring those
benefits to be measured at fair value instead of using two different
- Simplifying the amortization of deferred acquisition costs, and
- Increasing transparency by improving the effectiveness of disclosures.
The Board will determine an effective date for the ASU after
redeliberating comments received during the comment period and from the
public roundtable meetings.
More information about the proposed ASU—including a FASB in Focus overview—is available at www.fasb.org.
About the Financial Accounting Standards Board
Established in 1973, the FASB is the independent, private-sector,
not-for-profit organization based in Norwalk, Connecticut, that
establishes financial accounting and reporting standards for public and
private companies and not-for-profit organizations that follow Generally
Accepted Accounting Principles (GAAP). The FASB is recognized by the
Securities and Exchange Commission as the designated accounting standard
setter for public companies. FASB standards are recognized as
authoritative by many other organizations, including state Boards of
Accountancy and the American Institute of CPAs (AICPA). The FASB
develops and issues financial accounting standards through a transparent
and inclusive process intended to promote financial reporting that
provides useful information to investors and others who use financial
reports. The Financial Accounting Foundation (FAF) supports and oversees
the FASB. For more information, visit www.fasb.org.