Version 14 - August 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 as follows:
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.
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 one 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 early application of LDTI, an entity that chooses 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 does not 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 one-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 second 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 an insurance entity to (1) review and, if there is a change, update the assumptions used to measure cash flows at least annually and (2) update the discount rate assumption at each reporting date. The provision for risk of adverse deviation and premium deficiency (or loss recognition) testing are eliminated. The change in the liability estimate as a result of updating cash flow assumptions is required to be recognized in net income. The change in the liability estimate as a result of updating the discount rate assumption is required to be recognized in other comprehensive income. The amendments require that an insurance entity discount expected future cash flows at an upper-medium grade (low-credit-risk) fixed-income instrument yield that maximizes the use of observable market inputs.
The amendments require that an insurance entity measure all market risk benefits associated with deposit (or account balance) contracts at fair value. The portion of any change in fair value attributable to a change in the instrument specific credit risk is required to 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 that an insurance entity provide disaggregated rollforwards of beginning to ending balances of the liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities, and deferred acquisition costs. The amendments also require that an insurance entity disclose information about significant inputs, judgments, assumptions, and methods used in measurement, including changes in those inputs, judgments, and assumptions, and the effect of those changes on measurement.

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.