Reading time: 1 minute
As the holidays approach, JLK Rosenberger is taking a new perspective on a holiday classic – the Twelve Days of Christmas. Rather than filling your head with turtle doves and gold rings, we are focusing on the latest changes to SSAP and how they will impact your insurance company in 2019 and beyond.
Long-Duration Contracts (GAAP)
ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts updates Topic 944, Financial Services – Insurance, and applies to all insurance entities that issue long-duration contracts. The main provisions amend discounting loss reserves by requiring companies to review and amend assumptions to measure cash flows at each reporting period vs. locking in a discount rate at the inception of the contract. The amendments also require entities to discount using an upper-medium grate fixed-income yield vs. an entity’s expected yield curve to discount future cash flows.
Also included in the new standard is a simplified approach to amortizing deferred acquisition costs. Instead of allowing multiple amortization methods, the updated guidance states that DAC is amortized on a constant basis over the expected term of the related contracts. DAC is also required to be written off for unexpected contract terminations but not subject to an impairment test.
Finally, the new standards increase disclosures requiring disaggregated roll forwards and provide information about significant inputs, judgments, and assumptions used in determining information about long-duration contracts.
Join us tomorrow for day 8 in the 12 days of SSAP. If you have questions about long-duration contracts and how the changes will impact your insurance entity, please call us at 818-334-8623, or click here to contact us. We look forward to speaking with you soon.