{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/325/30/#55-implementation-guidance-and-illustrations","source":"FASB Accounting Standards Codification, Basic View","usage":"Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.","topic":"325","topic_title":"Investments—Other","subtopic":"325-30","subtopic_title":"Investments in Insurance Contracts","section":{"number":"55","label":"55 Implementation Guidance and Illustrations","anchor":"55-implementation-guidance-and-illustrations","is_sec":false,"groups":[{"block":null,"heading":"Illustrations","paragraphs":[{"citation":"325-30-55-1","para":"55-1","html":"<div class=\"asc-body\"><div class=\"norm-text\">This Example illustrates the application of the guidance in the General Subsections of this Subtopic to life insurance contracts other than life settlement contracts.</div> </div>","snippet":"This Example illustrates the application of the guidance in the General Subsections of this Subtopic to life insurance contracts other than life settlement contracts.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3f073e99c2547945d342ef64d999d6476f55bab31f906e57a394ab2bc45044f9","downloaded_from":"2026-09-09T23:44:21.128Z","last_downloaded_at":"2026-09-09T23:44:21.128Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481433","source_sha256":"e1a603ccd90bd8a65916bedc9747cd9b9042edbb45958a8f0360d224ea852da2"}},{"citation":"325-30-55-2","para":"55-2","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_B46AAF75-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">On January 1, 19X7, Entity TKO purchases a group variable-life policy on 20 executives of Entity TKO. The insurance entity issued an individual certificate for each executive when the policy was purchased. The entire policy was funded with an initial single premium of $10,000,000. Entity TKO will be paid the stated death benefit of the certificate when the insured dies. The policy contains a <a href=\"/glossary/s/#surrender-charge\" class=\"term\" title=\"A contractual fee imposed by the insurance entity when a policyholder surrenders the insurance policy that typically decreases over the life of the policy. The surrender charge represents a recovery of costs incurred by the insurance entity in originating the policy. It may or may not be explicitly called a surrender charge and can be embedded in other agreements besides the insurance contract. (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.)\"><span>surrender charge</span></a> of $50,000 per certificate if a certificate is surrendered. If all of the <a href=\"/glossary/c/#certificates\" class=\"term\" title=\"An insurance entity issues to each individual in a group contract a certificate of insurance for each person insured under the group contract. The certificate is merely a summary of the rights, duties, and benefits available under a group policy. If there is any conflict between the certificate and a group policy, the group policy is the controlling document. (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.)\"><span>certificates</span></a> are surrendered at once (that is, if the group policy is surrendered) the surrender charge is waived. The policy includes a <a href=\"/glossary/c/#claims-stabilization-reserve\" class=\"term\" title=\"The claims stabilization reserve is established through deductions from the policy account balance through the cost of insurance charge and is sometimes held in a general account (that is, an account that is intermingled with the insurance entity's assets) as opposed to a legally segregated account (sometimes referred to as a separate account). The amounts are accumulated in this account until a death benefit is paid. The death benefit represents a combination of the policy account balance and the claims stabilization reserve based on the contractual terms. The cost of insurance is recalculated periodically based on actual experience of the insured class. Annually, the claims stabilization reserve is reviewed and an experience credit may be issued back to the policyholder if the experience has been favorable. The balance in the claims stabilization reserve will be reviewed annually and to the extent the balance is greater than the forecasted or expected amount, an experience refund would get credited to the entity's policy account balance. An entity's claims stabilization reserve will generally be realized through the collection of death benefits or an experience refund that gets credited to the policyholder's policy account balance or upon surrender of the group policy. A claims stabilization reserve is included in a policy as a mechanism for the policyholder and the insurance entity to share in the mortality risk, which in this case is the risk that the deaths will occur sooner than originally expected. Absent a claims stabilization reserve, the policyholder's net cost of insurance would typically be higher than in a policy without a claims stabilization reserve. The claims stabilization reserve is sometimes referred to as a mortality reserve or a mortality retention reserve. (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.)\"><span>claims stabilization reserve</span></a> account and a provision that allows for the recovery of the upfront <a href=\"/glossary/d/#deferred-acquisition-costs-tax\" class=\"term\" title=\"Section 848 of the Internal Revenue Code requires insurance entities to capitalize certain policy acquisition costs and defer deducting them in determining the insurer's tax liability. These costs are known as the deferred acquisition costs tax and are based on a percentage of the premium received as specified by the Internal Revenue Code. The initial deferred acquisition costs tax is deducted from a policyholder's policy account balance when the premium is paid. The deferred acquisition costs tax is credited back to the policyholder's policy account balance as the tax deduction is recognized in the insurer's tax return. (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.)\"><span>deferred acquisition costs tax</span></a> over 11 years on a certificate-by-certificate basis even when an individual certificate is surrendered. The remaining balance in the claims stabilization reserve is paid out in cash to Entity TKO upon surrender of the final certificate. At December 31, 20X5, the individual components of Entity TKO's policy have the following values: </span></span> <ol class=\"ol-norm\"> <li class=\"li-norm\"><span class=\"linum\">a</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_B46AB0AD-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\"> <a href=\"/glossary/p/#policy-account-balance\" class=\"term\" title=\"At any point in time, this is the amount held by the insurance entity on behalf of the policyholder. This balance may be held in a general account, a separate account (a legally segregated account), or a combination of both on the insurance entity's balance sheet. This account includes premiums received from the policyholder, plus any credited income, less any relevant charges (acquisition costs, cost of insurance, and so forth). (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.)\"><span>Policy account balance</span></a> = $9,700,000 </span></span> </div> </li> <li class=\"li-norm\"><span class=\"linum\">b</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_B46AB19D-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\"> <a href=\"/glossary/c/#cash-surrender-value\" class=\"term\" title=\"The amount of cash that may be realized by the owner of a life insurance contract or annuity contract upon discontinuance and surrender of the contract before its maturity. The cash surrender value may be different from the policy account balance due to outstanding loans (including accrued interest) and surrender charges. (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.)\"><span>Cash surrender value</span></a> = $8,700,000 </span></span> </div> </li> <li class=\"li-norm\"><span class=\"linum\">c</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_B46AB2F5-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Claims stabilization reserve = $500,000 </span></span> </div> </li> <li class=\"li-norm\"><span class=\"linum\">d</span> <div class=\"p\"> <span class=\"sfragment\" id=\"sfr_B46AB3D3-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Deferred acquisition costs tax (on a discounted basis) = $250,000. </span></span> </div> </li> </ol> </div> </div>","snippet":"On January 1, 19X7, Entity TKO purchases a group variable-life policy on 20 executives of Entity TKO. The insurance entity issued an individual certificate for each executive when the policy was purchased. The entire pol…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4a71a36624c7bb833bb72474ae72549b6b84cc5f5cf06b3f977ac23d8ef86ecf","downloaded_from":"2026-09-09T23:44:21.128Z","last_downloaded_at":"2026-09-09T23:44:21.128Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481433","source_sha256":"e1a603ccd90bd8a65916bedc9747cd9b9042edbb45958a8f0360d224ea852da2"}},{"citation":"325-30-55-3","para":"55-3","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_B46AB4A5-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The following is an illustration of the amounts to be included in Entity TKO's financial statements at December 31, 20X5, under this Subtopic. </span></span> <ul class=\"ul simple\" id=\"d3e42882-111611__GUID-E6A933CA-F56D-4654-8FAB-7CCB1510D822\"> <li class=\"li\" id=\"d3e42882-111611__SL6385897-111611\"> <div class=\"p\"> <div class=\"fig figure fignone\"> <img src=\"/asc-img/GUID-9894ACEA-6D10-4B86-9A91-F95B987B4F53-low.gif\" altsource=\"GUID-9894ACEA-6D10-4B86-9A91-F95B987B4F53-low.gif\" alt=\" \" loading=\"lazy\"> <div class=\"figcaption\">Cash Surrender Value \" $8,700,000 \" Claims Stabilization Reserve \" 500,000 \" Deferred Acquisition Costs tax \" 250,000 \" \" $9,450,000 \" </div></div> </div> </li> </ul> </div> </div>","snippet":"The following is an illustration of the amounts to be included in Entity TKO's financial statements at December 31, 20X5, under this Subtopic.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:06b76637b636290957644e0a7f70f150f3195c848231c104e51492ea77e3e2fb","downloaded_from":"2026-09-09T23:44:21.128Z","last_downloaded_at":"2026-09-09T23:44:21.128Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481433","source_sha256":"e1a603ccd90bd8a65916bedc9747cd9b9042edbb45958a8f0360d224ea852da2"}},{"citation":"325-30-55-4","para":"55-4","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_B46AB88F-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">In evaluating the circumstances to determine the amount that could be realized under the insurance contract, Entity TKO considers the cash surrender value (policy account balance of $9,700,000 less surrender charge of $1,000,000), the claims stabilization reserve, and the deferred acquisition costs tax as each of these amounts is realizable based on the contractual terms and is not dependent on surrendering all of the policies at once. The claims stabilization reserve is included in the amount that could be realized because the claims stabilization reserve will be recovered when the final policy is surrendered and is not dependent on the surrender of all of the policies at once. The surrender charge of $1,000,000 (20 certificates at $50,000 per certificate) is not assumed to be waived because the waiver of those charges requires the surrender of all of the certificates at once. </span></span> </div> </div>","snippet":"In evaluating the circumstances to determine the amount that could be realized under the insurance contract, Entity TKO considers the cash surrender value (policy account balance of $9,700,000 less surrender charge of $1…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7080df09d96176d3f2933b900d2a0914b04f629ac7d6a46b9c15eb5c30d79dd3","downloaded_from":"2026-09-09T23:44:21.128Z","last_downloaded_at":"2026-09-09T23:44:21.128Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481433","source_sha256":"e1a603ccd90bd8a65916bedc9747cd9b9042edbb45958a8f0360d224ea852da2"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:66f3aa80b8104f7d6d6f45fc33a4abe3449fb42a47ff221c6283911b2101ba78","downloaded_from":"2026-09-09T23:44:21.128Z","last_downloaded_at":"2026-09-09T23:44:21.128Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481433","source_sha256":"e1a603ccd90bd8a65916bedc9747cd9b9042edbb45958a8f0360d224ea852da2"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ba5ba9ff4b740228058603445757852112df64447e34dd6b9c5d5d1541692a24","downloaded_from":"2026-09-09T23:44:21.128Z","last_downloaded_at":"2026-09-09T23:44:21.128Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481433","source_sha256":"e1a603ccd90bd8a65916bedc9747cd9b9042edbb45958a8f0360d224ea852da2"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ba5ba9ff4b740228058603445757852112df64447e34dd6b9c5d5d1541692a24","downloaded_from":"2026-09-09T23:44:21.128Z","last_downloaded_at":"2026-09-09T23:44:21.128Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481433","source_sha256":"e1a603ccd90bd8a65916bedc9747cd9b9042edbb45958a8f0360d224ea852da2"}}