Version 13 - April 2025 (CUD release)

Content update

Legislative updates

The amendments in this update amend the mandatory effective dates and early application requirements of Accounting Standards Update No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, for all entities are as follows:
For fiscal years starting after December 15, 2022, and interim periods within those years, this applies to public business entities that are Securities and Exchange Commission (SEC) filers, except those eligible as smaller reporting companies.
Public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.
The amendments in this Update defer the effective date of LDTI for all entities by 1 year as follows:
For public business entities that meet the definition of an SEC filer and are not SRCs, LDTI is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.
For all other entities, LDTI is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025.
To facilitate the early application of LDTI, an entity that selects early application may do so as of the beginning of the prior period presented or as of the beginning of the earliest period presented.
For example, a large calendar-year public insurance entity could reflect LDTI as of January 1, 2021 (and record a transition adjustment as of that date) (1) in its 2022 financial statements if the entity elects early application or (2) in its 2023 financial statements if the entity doesn’t elect early application.

For public business entities that meet the definition of an SEC filer, excluding entities eligible to be SRCs as defined by the SEC, the amendments in Update 2018-12 are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The 1 time determination of whether 2 an entity is an SRC should be based on an entity’s most recent determination as of November 15, 2019 (the issuance date of this Update), in accordance with SEC regulations. For example, because SRC status is determined on the last business day of the most recent 2nd quarter, the most recent determination date is June 28, 2019, for calendar- year-end companies. Early application of the amendments in Update 2018-12 is permitted.
For all other entities, the amendments in Update 2018-12 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early application of the amendments in Update 2018-12 is permitted.

The amendments in this update require insurance companies to review and update the assumptions used to measure cash flows at least once a year. They must also update the discount rate assumption on each reporting date. The amendments eliminate the need for provisions related to the risk of adverse deviation and premium deficiency testing. Changes in the liability estimate due to updated cash flow assumptions must be recorded in net income, while changes due to updated discount rate assumptions should be recognized in other comprehensive income. Additionally, the amendments require that insurance companies discount expected future cash flows using a yield from high-quality, low-credit-risk fixed-income instruments, and prioritizing observable market data.
The amendments require insurance companies to measure all market risk benefits related to deposit or account balance contracts at fair value. Any change in fair value that is due to changes in the credit risk specific to the instrument must be recognized in other comprehensive income.
The amendments simplify the amortization of deferred acquisition costs and other balances amortized in proportion to premiums, gross profits, or gross margins and require that those balances be amortized on a constant level basis over the expected term of the related contracts. Deferred acquisition costs are required to be written off for unexpected contract terminations but are not subject to an impairment test.
The amendments require insurance companies to clearly show how certain financial figures change over time, specifically from the beginning to the ending balances. These figures include the liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities, and deferred acquisition costs. Additionally, the amendments mandate that insurance companies disclose important details about the inputs, judgments, assumptions, and methods they use for these measurements. They must also explain any changes in these inputs, judgments, and assumptions, and describe how those changes affect the overall measurements.

ASU 2020-11: Early adoption is permitted. For entities that elect early application, the transition date may be the beginning of the prior period presented rather than the beginning of the earliest period presented.
ASU 2019-09: Early adoption is permitted.
ASU 2018-12: Early adoption is permitted.