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The FASB issued new guidance, Accounting Standards Update 2018-12 , Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (ASU 2018-12), that revises key elements of the measurement models and disclosure requirements for long-duration insurance contracts issued by insurers and reinsurers. It is the biggest change in US GAAP for life insurers in the last 40 years. The FASB’s objective was to improve, simplify, and enhance accounting for long duration contracts.
This guide assumes that ASU 2018-12 has been adopted.
ASC 944 Financial Services-Insurance (ASC 944) provides guidance on various elements of insurance transactions, focusing principally on:
  • Insurance revenue recognition
  • Claim and benefit liability and related expense recognition
  • Acquisition cost deferability and amortization
Guidance is also provided on balance sheet and income statement presentation and disclosure of insurance activities. In addition, ASC 944 provides incremental industry-specific accounting guidance on other accounting and financial reporting matters, including certain aspects of investment contract transactions, business combinations, and derivatives.
ASC 944 includes highly-specialized accounting guidance that is applicable only to insurance entities, as defined. The insurance contract accounting guidance within ASC 944 applies to those written (issued) contracts qualifying as insurance as well as assumed reinsurance contracts and purchased reinsurance contracts.
This chapter provides an overview of:
  • The types of entities that are subject to the scope of ASC 944
  • The types of transactions that are subject to the scope of ASC 944 either partially or totally
  • The insurance risk analysis that determines whether a issued contract is subject to insurance (or reinsurance) accounting under ASC 944
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