Why Is the FASB Issuing This Accounting Standards Update (Update)?

On August 15, 2018, the Board issued Accounting Standards Update No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, which made targeted amendments to improve, simplify, and enhance the financial reporting requirements for long- duration contracts issued by insurance entities. For public business entities, the amendments in Update 2018-12 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, those amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early application of the amendments is permitted.

The Board received a technical agenda request to defer the effective date of the amendments in Update 2018-12 for public entities by one year.

Separately, the Board issued Accounting Standards Update No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, on November 15, 2019. The Board developed a philosophy to extend and simplify how effective dates are staggered between larger public companies and all other entities. Under this philosophy, a major Update would first be effective for public business entities that are Securities and Exchange Commission (SEC) filers, excluding entities eligible to be smaller reporting companies (SRCs) under the SEC’s definition. The Master Glossary of the Codification defines public business entities and SEC filers. For all other entities, it is anticipated that the Board will consider requiring an effective date staggered at least two years after the effective date for public business entities that meet the definition of an SEC filer, excluding entities eligible to be SRCs.

The amendments in this Update address the agenda request and apply the new philosophy on effective dates to the amendments in Update 2018-12.

What Are the Main Provisions?

The amendments in this Update defer the effective date of the amendments in Update 2018-12 for all entities.

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 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.