# ASC 310-944-55: Receivables — Financial Services—Insurance — 55 Implementation Guidance and Illustrations

Source: FASB Accounting Standards Codification, Basic View

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## ASC 310-944-55: 55 Implementation Guidance and Illustrations

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### Financial Guarantee Insurance Contracts

#### Illustrations

##### [310-944-55-1](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-1)

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This Example illustrates the accounting when prepayment assumptions change and illustrates the resulting change to the expected period required by paragraph [944-310-35-5](https://asc.understandingaccounting.org/asc/310/944/#310-944-35-5). This Example assumes that annual premiums are received as payments over the expected period of the financial guarantee insurance contract and further assumes all of the following:

-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-F02D2C57-AB60-47BB-BA63-10101BC184C3-low.gif)
    
    Key Facts: Total principal outstanding "$75,000,000" Premium rate "100 basis points, annually, received at the beginning of the period" Contract period 10 years Initial expected period 7 years Discount rate at inception 5% (a) (a) "For simplicity, the current risk-free discount rate has not been updated in this example when the prepayment assumptions change as required by paragraph 944-310-35-5. If the discount rate had changed at the time of the change in prepayment assumptions, that new discount rate would be used."

##### [310-944-55-2](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-2)

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The following table illustrates all of the following, estimated at inception:

1.  a
    
    The expected insured principal amounts outstanding during each period
    
2.  b
    
    The expected insured principal payments
    
3.  c
    
    The expected premium payments
    
4.  d
    
    The present value of premiums expected.
    

-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-57EA8E3B-70AA-409B-BF39-63434F02ECCB-low.gif)
    
    Table 1 Year "Expected Insured Principal Amounts Outstanding" "Expected Insured Principal Payments" "Expected Premium Payments" "Present Value of Premiums Expected" 1 " $75,000,000 " " $6,500,000 " " $750,000 " (a) " $750,000 " (b) 2 " 68,500,000 " " 7,800,000 " " 685,000 " " 652,381 " 3 " 60,700,000 " " 9,100,000 " " 607,000 " " 550,567 " 4 " 51,600,000 " " 11,700,000 " " 516,000 " " 445,740 " 5 " 39,900,000 " " 15,600,000 " " 399,000 " " 328,258 " 6 " 24,300,000 " " 15,600,000 " " 243,000 " " 190,397 " 7 " 8,700,000 " " 8,700,000 " " 87,000 " " 64,921 " 8 - - - - 9 - - - - 10 - - - - Total " $328,700,000 " " $75,000,000 " " $3,287,000 " " $2,982,264 " "Constant rate 0.0090729 ($2,982,264 ÷ $328,700,000)" (a) "Calculated as expected insured principal amount outstanding multiplied by the premium rate, which for Year 1 is $75,000,000 × 0.01 (100 basis points)." (b) "Calculated as the present value of the expected premium payments for the appropriate number of periods, which for Year 1 is $750,000 ÷ (1 + 0.05) t-1, where t represents the current year."

##### [310-944-55-3](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-3)

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The constant rate is calculated in the table in the preceding paragraph as the ratio of the present value of the premiums expected to be collected and the sum of all insured principal amounts outstanding during each reporting period.

##### [310-944-55-4](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-4)

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The following table presents the rollforward of the premium receivable from period to period. The premium receivable will decrease during the year as expected premium payments are received, and it will increase as a result of the accretion of the discount on the premium receivable each period that is recognized in earnings.

-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-FF91F9B2-BDBB-4A42-BB13-812F93ABB2C0-low.gif)
    
    Year "Premium Receivable at Beginning of Year" "Expected Premium Payments" "Accretion of Discount on Premium Receivable" "Premium Receivable at End of Year" 1 " $2,982,264 " " $750,000 " " $111,613 " (a) " $2,343,877 " (b) 2 " 2,343,877 " " 685,000 " " 82,944 " " 1,741,821 " 3 " 1,741,821 " " 607,000 " " 56,741 " " 1,191,562 " 4 " 1,191,562 " " 516,000 " " 33,778 " " 709,340 " 5 " 709,340 " " 399,000 " " 15,517 " " 325,857 " 6 " 325,857 " " 243,000 " " 4,143 " " 87,000 " 7 " 87,000 " " 87,000 " - - 8 - - - - 9 - - - - 10 - - - - Total " $3,287,000 " " $304,736 " (a) "Calculated as the premium receivable balance at the beginning of the year less the expected premium payment multiplied by the discount rate, which for Year 1 is ($2,982,264 - $750,000) × 5%." (b) "Calculated as the premium receivable balance at the beginning of the year less the expected premium payments, plus the accretion of the discount on the premium receivable, which for Year 1 is $2,982,264 - $750,000 + $111,613."

##### [310-944-55-5](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-5)

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The following table illustrates that the expected total revenue recognized each period will be the sum of the expected premium revenue recognized each period based on the constant rate of 0.0090729 and the accretion of the discount on the premium receivable each period. The depiction of _expected premium revenue recognized_ and _accretion of discount on premium receivable_ in the table is not intended to draw any conclusions about the presentation of these amounts in the statement of income.

-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-4786419C-F5FF-4892-82B2-36EAFD4BD862-low.gif)
    
    Year "Expected Insured Principal Amounts Outstanding" "Expected Insured Principal Payments" "Expected Premium Revenue Recognized" "Accretion of Discount on Premium Receivable (b)" "Expected Total Revenue Recognized" 1 " $75,000,000 " " $6,500,000 " " $680,468 " (a) " $111,613 " " $792,081 " (c) 2 " 68,500,000 " " 7,800,000 " " 621,494 " " 82,944 " " 704,438 " 3 " 60,700,000 " " 9,100,000 " " 550,725 " " 56,741 " " 607,466 " 4 " 51,600,000 " " 11,700,000 " " 468,162 " " 33,778 " " 501,940 " 5 " 39,900,000 " " 15,600,000 " " 362,009 " " 15,517 " " 377,526 " 6 " 24,300,000 " " 15,600,000 " " 220,472 " " 4,143 " " 224,615 " 7 " 8,700,000 " " 8,700,000 " " 78,934 " - " 78,934 " 8 - - - - - 9 - - - - - 10 - - - - - Total " $328,700,000 " " $75,000,000 " " $2,982,264 " " $304,736 " " $3,287,000 " (a) "Calculated as the expected insured principal amount outstanding multiplied by the constant rate, which for Year 1 is $75,000,000 × 0.0090729." (b) See column titled Accretion of Discount on Premium Receivable in the table in paragraph 944-310-55-4. (c) "Calculated as the sum of the expected premium revenue recognized and the accretion of the discount on the premium receivable, which for Year 1 is $680,468 + $111,613."

##### [310-944-55-6](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-6)

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The following table illustrates the reduction of the unearned premium revenue due to the recognition of premium revenue during each reporting period.

-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-5A51D8BD-380A-49AF-9B5B-71A87057FFE2-low.gif)
    
    Year "Beginning Unearned Premium Revenue" "Expected Premium Revenue Recognized (a)" "Ending Unearned Premium Revenue" 1 " $2,982,264 " " $680,468 " " $2,301,796 " (b) 2 " 2,301,796 " " 621,494 " " 1,680,302 " 3 " 1,680,302 " " 550,725 " " 1,129,577 " 4 " 1,129,577 " " 468,162 " " 661,415 " 5 " 661,415 " " 362,009 " " 299,406 " 6 " 299,406 " " 220,472 " " 78,934 " 7 " 78,934 " " 78,934 " - 8 - - - 9 - - - 10 - - - Total " $2,982,264 " (a) See column titled Expected Premium Revenue Recognized in the table in paragraph 944-310-55-5. (b) "Calculated as the beginning unearned premium revenue balance less the expected premium revenue recognized during the period, which for Year 1 is $2,982,264 - $680,468."

##### [310-944-55-7](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-7)

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At the beginning of Year 3, the insurance entity estimates that prepayments will differ from its initial assumptions. Its new estimate is that the expected period is nine years from inception (the change represents a change in assumptions and not a change due to an error, which would be accounted for in accordance with Topic 250).

##### [310-944-55-8](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-8)

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The following table illustrates the information presented in the table in paragraph [944-310-55-2](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-2) as if the new prepayment assumptions were used from inception. The constant rate calculated in the table is not the new constant rate, but, rather, is presented here to assist in understanding the calculations necessary to determine the adjustment. For simplicity, the discount rate has not been updated when the prepayment assumptions change as required by paragraph [944-310-35-5](https://asc.understandingaccounting.org/asc/310/944/#310-944-35-5). If the discount rate had changed at the time of the change in prepayment assumptions, that new discount rate would be used.

-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-7E460698-63CB-49A7-8F0A-B3A32D8CA650-low.gif)
    
    Year "Expected Insured Principal Amounts Outstanding" "Expected Insured Principal Payments" "Expected Premium Payments" "Present Value of Premiums Expected" 1 " $75,000,000 " " $6,500,000 " " $750,000 " (a) " $750,000 " (b) 2 " 68,500,000 " " 7,800,000 " " 685,000 " " 652,381 " 3 " 60,700,000 " " 5,350,000 " " 607,000 " " 550,567 " 4 " 55,350,000 " " 7,450,000 " " 553,500 " " 478,134 " 5 " 47,900,000 " " 11,600,000 " " 479,000 " " 394,074 " 6 " 36,300,000 " " 11,600,000 " " 363,000 " " 284,420 " 7 " 24,700,000 " " 8,450,000 " " 247,000 " " 184,315 " 8 " 16,250,000 " " 8,250,000 " " 162,500 " " 115,486 " 9 " 8,000,000 " " 8,000,000 " " 80,000 " " 54,148 " 10 - - - - Total " $392,700,000 " " $75,000,000 " " $3,927,000 " " $3,463,525 " "Constant rate 0.00881977 ($3,463,525 ÷ $392,700,000)" (a) "Calculated as expected insured principal amount outstanding multiplied by the premium rate, which for Year 1 is $75,000,000 × 0.01 (100 basis points)." (b) "Calculated as the present value of the expected premium payments for the appropriate number of periods, which for Year 1 is $750,000 ÷ (1 + 0.05) t-1, where t represents the current year."

##### [310-944-55-9](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-9)

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The following table illustrates the information presented in the table in paragraph [944-310-55-4](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-4) as if the new prepayment assumptions were used from inception.

-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-0F12EF47-085A-4226-89EC-041BCA2FBC06-low.gif)
    
    Year "Premium Receivable at Beginning of Year" "Expected Premium Payments" "Accretion of Discount on Premium Receivable" "Premium Receivable at End of Year" 1 " $3,463,525 " " $750,000 " " $135,676 " (a) " $2,849,201 " (b) 2 " 2,849,201 " " 685,000 " " 108,210 " " 2,272,411 " 3 " 2,272,411 " " 607,000 " " 83,270 " " 1,748,681 " 4 " 1,748,681 " " 553,500 " " 59,759 " " 1,254,940 " 5 " 1,254,940 " " 479,000 " " 38,797 " " 814,737 " 6 " 814,737 " " 363,000 " " 22,587 " " 474,324 " 7 " 474,324 " " 247,000 " " 11,366 " " 238,690 " 8 " 238,690 " " 162,500 " " 3,810 " " 80,000 " 9 " 80,000 " " 80,000 " - - 10 - - - - Total " $3,927,000 " " $463,475 " (a) "Calculated as the premium receivable balance at the beginning of the year less the expected premium payment multiplied by the discount rate, which for Year 1 is ($3,463,525 - $750,000) × 5%." (b) "Calculated as the premium receivable balance at the beginning of the year less the expected premium payments, plus the accretion of the discount on the premium receivable, which for Year 1 is $3,463,525 - $750,000 + $135,676."

##### [310-944-55-10](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-10)

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The following table illustrates the information presented in the table in paragraph [944-310-55-5](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-5) as if the new prepayment assumptions were used from inception. The depiction of _expected premium revenue recognized_ and _accretion of discount on premium receivable_ in the table is not intended to draw any conclusions about the presentation of these amounts in the statement of income.

-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-3183908A-4532-4069-9638-225C5AF50EA0-low.gif)
    
    Year "Expected Insured Principal Amounts Outstanding" "Expected Insured Principal Payments" "Expected Premium Revenue Recognized" "Accretion of Discount on Premium Receivable (b)" "Expected Total Revenue Recognized" 1 " $75,000,000 " " $6,500,000 " " $661,483 " (a) " $135,676 " " $797,159 " (c) 2 " 68,500,000 " " 7,800,000 " " 604,155 " " 108,210 " " 712,365 " 3 " 60,700,000 " " 5,350,000 " " 535,360 " " 83,270 " " 618,630 " 4 " 55,350,000 " " 7,450,000 " " 488,175 " " 59,759 " " 547,934 " 5 " 47,900,000 " " 11,600,000 " " 422,467 " " 38,797 " " 461,264 " 6 " 36,300,000 " " 11,600,000 " " 320,158 " " 22,587 " " 342,745 " 7 " 24,700,000 " " 8,450,000 " " 217,848 " " 11,366 " " 229,214 " 8 " 16,250,000 " " 8,250,000 " " 143,321 " " 3,810 " " 147,131 " 9 " 8,000,000 " " 8,000,000 " " 70,558 " - " 70,558 " 10 - - - - - Total " $392,700,000 " " $75,000,000 " " $3,463,525 " " $463,475 " " $3,927,000 " (a) "Calculated as the expected insured principal amount outstanding multiplied by the constant rate, which in Year 1 is $75,000,000 × 0.00881977." (b) "See column titled Accretion of Discount on Premium Receivable in the table in paragraph 944-310-55-9." (c) "Calculated as the sum of expected premium revenue recognized and the accretion of the discount on the premium receivable, which for Year 1 is $661,483 + $135,676."

##### [310-944-55-11](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-11)

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The following table illustrates the information presented in the table in paragraph [944-310-55-6](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-6) as if the new prepayment assumptions were used from inception.

-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-CEF88900-B885-457B-A524-FA0667520F3F-low.gif)
    
    Year "Beginning Unearned Premium Revenue" "Expected Premium Revenue Recognized (a)" "Ending Unearned Premium Revenue" 1 " $3,463,525 " " $661,483 " " $2,802,042 " (b) 2 " 2,802,042 " " 604,155 " " 2,197,887 " 3 " 2,197,887 " " 535,360 " " 1,662,527 " 4 " 1,662,527 " " 488,175 " " 1,174,352 " 5 " 1,174,352 " " 422,467 " " 751,885 " 6 " 751,885 " " 320,158 " " 431,727 " 7 " 431,727 " " 217,848 " " 213,879 " 8 " 213,879 " " 143,321 " " 70,558 " 9 " 70,558 " " 70,558 " - 10 - - - Total " $3,463,525 " (a) See column titled Expected Premium Revenue Recognized in the table in paragraph 944-310-55-10. (b) "Calculated as the beginning unearned premium revenue balance less expected premium revenue recognized during the period, which for Year 1 is $3,463,525 - $661,483."

##### [310-944-55-12](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-12)

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Based on the new constant rate, the adjustment to the premium receivable and unearned premium revenue is an increase of $530,590 (calculated as the premium receivable end-of-year balance in Year 2 using the updated prepayment assumptions \[$2,272,411 from the table in paragraph [944-310-55-9](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-9)\] less the premium receivable end-of-year balance in Year 2 using the initial prepayment assumptions \[$1,741,821 from the table in paragraph [944-310-55-4](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-4)\]).

##### [310-944-55-13](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-13)

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The following calculation illustrates how the unearned premium revenue balance is determined at the beginning of Year 3.

-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-8EB3B37E-AC72-4B62-B34C-6F9A5471A134-low.gif)
    
    Beginning unearned premium revenue using original assumptions " $2,982,264 " (a) "Less: Premium revenue recognized to date in Years 1 and 2" " $1,301,962 " (b) Adjustment for change in prepayment assumptions " $530,590 " (c) "Adjusted unearned premium revenue at beginning of Year 3" " $2,210,892 " Sum of all expected insured principal amounts outstanding during each reporting period for Years 3-9 " $249,200,000 " (d) New constant rate 0.00887196 (e) (a) See column titled Present Value of Premiums Expected in the table in paragraph 944-330-55-2. (b) "Calculated as $680,468 + $621,494 (expected premium revenue recognized in Years 1 and 2 in the table in paragraph 944-310-55-5)." (c) See calculation in paragraph 944-310-55-12. (d) "Calculated as the sum of all insured principal amounts outstanding for Years 3-9 in the table in paragraph 944-310-55-8 ($60,700,000 + $55,350,000 + $47,900,000 + $36,300,000 + $24,700,000 + $16,250,000 + $8,000,000)." (e) "Calculated as the adjusted unearned premium revenue at the beginning of Year 3 divided by the sum of all expected insured principal amounts outstanding during each reporting period for Years 3 through 9, which equals $2,210,892 ÷ $249,200,000."

##### [310-944-55-14](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-14)

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Source downloaded (UTC): 2026-09-09T23:30:15.101Z to 2026-09-09T23:30:15.101Z

Record version: sha256:3340354cd7387b65dcf41c9b77ed8748f6e405d9060be9e814898e394b5f86a4

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


The following table illustrates both of the following:

1.  a
    
    The actual premium revenue recognized and discount accreted on the premium receivable for Years 1 and 2
    
2.  b
    
    The revised expected premium revenue recognition and accretion on the premium receivable from Years 3-9 based on the new prepayment assumptions.
    

The depiction of _expected premium revenue recognized_ and _accretion of discount on premium receivable_ in the table is not intended to draw any conclusions about the presentation of these amounts in the statement of income.

-   ![ ](https://asc.understandingaccounting.org/asc-img/GUID-078B42D4-6412-4860-8348-FE112013B10F-low.gif)
    
    Year "Premium Revenue Recognized" "Accretion of Discount on Premium Receivable" "Expected Premium Revenue Recognized" "Accretion of Discount on Premium Receivable" "Total Revenue Recognized" 1 " $680,468 " " $111,613 " " $792,081 " 2 " 621,494 " " 82,944 " " 704,438 " 3 " $538,528 " (a) " $83,270 " " 621,798 " 4 " 491,063 " " 59,759 " " 550,822 " 5 " 424,967 " " 38,797 " " 463,764 " 6 " 322,052 " " 22,587 " " 344,639 " 7 " 219,137 " " 11,366 " " 230,503 " 8 " 144,169 " " 3,810 " " 147,979 " 9 " 70,976 " - " 70,976 " 10 - - - Total " $1,301,962 " " $194,557 " " $2,210,892 " " $219,589 " " $3,927,000 " (a) "Calculated as the insured principal amount outstanding multiplied by the new constant rate, which for Year 3 is $60,700,000 × 0.00887196."