Lecture Notes: Industry Publications

Introduction

• Discusses the 2020 edition of Deloitte's Insurance Accounting and Financial Reporting Update.
• The FASB deferred the effective date of ASU 2018-12 by one year due to COVID-19.
• Emphasis on high-quality implementation and education on new standards.

Economic Growth

• COVID-19 brought challenges such as transitioning to remote work and reassessing financial strategies.
• Insurers must manage reputational risks and maintain client connections.

Accounting Changes

• Limited changes to accounting guidance in 2020.
• Focus on adopting major standards by FASB, like ASU 2018-12 for long-duration contracts.

Long-Duration Contracts (ASU 2018-12)

Background

• Amended accounting and disclosure for long-duration insurance contracts.
• Enhanced measurement of liability for future policy benefits and market risk benefits.

Key Provisions

• Liability for future policy benefits updated regularly.
• New model for market risk benefits.
• Changes to deferred acquisition costs (DAC) amortization.
• New disclosure requirements.

Revenue Recognition

• ASU 2020-05 issues relief for entities affected by COVID-19.
• Disclosure themes emphasize the application of ASC 606.

Financial Instruments

Codification Improvements

• ASU 2019-04 and ASU 2020-03 clarify financial instruments guidance.
• Key amendments include fair value disclosures and measurement alternatives.

Credit Losses

• Introduction of CECL model under ASU 2016-13.
• Recognizes expected credit losses at inception.

Derivatives and Hedging

• ASU 2020-01 addresses equity securities and forward contracts.
• ASU 2019-04 clarifies hedge accounting.

Reference Rate Reform

• ASU 2020-04 provides optional guidance for LIBOR transition.
• SEC encourages risk assessment for reference rate changes.

Leases

Developments

• FASB issued guidance for rent concessions due to COVID-19.
• Roundtable discussions addressed implementation challenges.

Effective Date Changes

• ASU 2020-05 defers lease standards effective dates for certain entities.

Income Taxes

New and Proposed Standards

• ASU 2019-12 simplifies accounting for income taxes.
• Proposed changes aim to enhance disclosure requirements.

Consolidation

• ASU 2018-17 amends related-party guidance in ASC 810.
• Adds private-company scope exception for VIE guidance.

Compensation

• ASU 2018-07 simplifies nonemployee share-based payment accounting.
• ASU 2019-08 clarifies share-based payments to customers.

Cloud Computing Arrangements

• ASU 2018-15 addresses cost capitalization for service contracts.

NAIC Update

• Overview of statutory accounting principles and meetings by NAIC.

Contacts

• Lists key Deloitte specialists for further inquiries and support.

Appendix

• Includes standards, literature, and abbreviations relevant to the discussed topics.