# ASC 325-30-40: Investments—Other — Investments in Insurance Contracts — 40 Derecognition

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/325/30/#40-derecognition)

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## ASC 325-30-40: 40 Derecognition

[Read section](https://asc.understandingaccounting.org/asc/325/30/#40-derecognition)

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### Life Settlement Contracts

#### Exchange of Mutual Membership Interests for Stock in a Demutualization

##### [325-30-40-1](https://asc.understandingaccounting.org/asc/325/30/#325-30-40-1)

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Any gain on an exchange of mutual membership interests for stock in a demutualization shall be recognized in income from continuing operations.

#### Investment Method

##### [325-30-40-1A](https://asc.understandingaccounting.org/asc/325/30/#325-30-40-1A)

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Upon the death of the insured, the investor shall recognize in earnings (or other performance indicators for entities that do not report earnings) the difference between the carrying amount of a [life settlement contract](https://asc.understandingaccounting.org/glossary/l/#life-settlement-contract "A life settlement contract is a contract between the owner of a life insurance policy (the policy owner) and a third-party investor (investor), and has all of the following characteristics: The investor does not have an insurable interest (an interest in the survival of the insured, which is required to support the issuance of an insurance policy). The investor provides consideration to the policy owner of an amount in excess of the current cash surrender value of the life insurance policy. The contract pays the face value of the life insurance policy to an investor when the insured dies.") and the life insurance proceeds of the underlying life [insurance policy](https://asc.understandingaccounting.org/glossary/i/#insurance-policy "The legal agreement between the policyholder and the insurance entity that states the terms of the arrangement. The term insurance policy includes all riders, attachments, side agreements, and other related documents that are either directly or indirectly part of the contractual arrangement. (Note: The use of this glossary term is not consistent among legal contracts. When determining the applicability of this term, the economic substance of the item shall be taken into consideration.)").