# ASC 340-30: Other Assets and Deferred Costs — Insurance Contracts That Do Not Transfer Insurance Risk Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/340/30/) 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. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-09T23:55:41.723Z to 2026-09-09T23:56:05.098Z Record version: sha256:df8046fcc671374c2c9ddf417fb584d1681838552b8674e24fbe96cc2ec09ed4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30: Other Assets and Deferred Costs — Insurance Contracts That Do Not Transfer Insurance Risk ### Machine-generated study aids ```json { "summary": "ASC 340-30 tells you how to apply the deposit method of accounting to insurance and reinsurance contracts that fail to transfer insurance risk (which requires transfer of both timing risk and underwriting risk). At inception a deposit asset or liability is recognized at consideration paid or received less explicitly identified premiums or fees retained (340-30-25-1; 340-30-30-1). Subsequent measurement depends on which of four risk categories the contract falls into: effective-yield/interest-method accretion for timing-risk-only or no-risk contracts, unexpired-coverage plus present value of expected recoveries for underwriting-risk-only contracts, and the open-year method for indeterminate-risk contracts.", "key_points": [ "Insurance risk transfer requires both timing risk and underwriting risk, producing four deposit categories: timing risk only, underwriting risk only, neither, or indeterminate risk (340-30-05-2).", "A deposit asset or liability is recognized at inception and measured at the consideration paid or received less any explicitly identified premiums or fees retained by the insurer or reinsurer, irrespective of contract experience (340-30-25-1; 340-30-30-1).", "For contracts transferring only significant timing risk or neither risk, the deposit is adjusted each reporting date using the effective yield on estimated cash flows (interest method, consistent with 310-20 and 835-30), with a corresponding credit or charge to interest income or expense (340-30-35-1 through 35-3; 340-30-45-2).", "If cash flow estimates change, the effective yield is recalculated retrospectively and the deposit is adjusted to the amount that would have existed had the new yield applied since inception (340-30-35-3); a significant change may signal that significant underwriting risk exists, requiring conversion to that model (340-30-35-4).", "For contracts transferring only significant underwriting risk, the deposit equals the unexpired portion of coverage until a reimbursable loss is incurred, then the present value of expected future cash flows plus remaining unexpired coverage (340-30-35-5), discounted at the current rate on U.S. government obligations with similar cash-flow characteristics (adjusted for default risk only by the insured/ceding entity), locked in at each loss date (340-30-35-6).", "Contracts with indeterminate risk follow the open-year method: effects are excluded from net income and aggregated on the balance sheet until premiums can be reasonably estimated and allocated, but the method cannot defer losses recognizable under Subtopic 450-20 (340-30-25-3 through 25-5); reclassification is a change in accounting estimate under Topic 250 (340-30-25-6 through 25-7).", "Deposit assets and liabilities are reported gross unless a right of offset exists under Subtopic 210-20, and entities must disclose a description of the contracts plus separate totals of deposit assets and deposit liabilities (340-30-45-1; 340-30-50-1)." ], "categories": [ "Recognition", "Initial measurement", "Subsequent measurement", "Industry-specific" ], "audience_level": "advanced", "student_note": "This is the \"failed reinsurance\" bucket: if a contract does not shift both timing and underwriting risk, no premium/loss accounting is allowed and the arrangement is booked like a financing (deposit) with interest. The common mistake is assuming one accounting model applies to all deposits — the measurement rule differs sharply between timing-risk-only contracts (effective yield) and underwriting-risk-only contracts (unexpired coverage plus discounted expected recoveries).", "related_topics": [ "944-20", "944-605", "720-20", "310-20", "835-30", "210-20" ], "key_concepts": [ "deposit method of accounting", "insurance risk transfer", "timing risk", "underwriting risk", "indeterminate risk", "open-year method", "effective yield / interest method", "unexpired portion of coverage" ] } ``` Source downloaded (UTC): 2026-09-09T23:55:41.723Z to 2026-09-09T23:55:41.723Z Record version: sha256:7dabf92dd9c70b6d2dab2e15fc13827cf9e52e69b35dcbcc493a182ccbb45165 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/340/30/#00-status) SEC content: no ##### [340-30-00-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:41.723Z to 2026-09-09T23:55:41.723Z Record version: sha256:03a7c80f2668084e362ff4aad71858ec09fa02bc871a5d14360088800a4c12a8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
ReinsuranceAddedAccounting Standards Update No. 2016-1912/14/2016
340-30-15-2AmendedAccounting Standards Update No. 2016-1912/14/2016
340-30-25-1AmendedAccounting Standards Update No. 2016-1912/14/2016
340-30-35-1AmendedAccounting Standards Update No. 2016-1912/14/2016
340-30-45-3AmendedAccounting Standards Update No. 2016-1912/14/2016
340-30-50-2AmendedAccounting Standards Update No. 2024-0311/04/2024
340-30-50-2AmendedAccounting Standards Update No. 2016-1912/14/2016
340-30-55-2AmendedAccounting Standards Update No. 2016-1912/14/2016
Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:ce695ac0fe9c13b2dedc982b53252e1183dddf1084c69e5161ff4268e7f4c703 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/30/#05-overview-and-background) SEC content: no ##### [340-30-05-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:a691ab5b05e0ce315109bc43cf3572bc7386e89304834c02c7f8c41e853cde8e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on how to apply the deposit method of accounting when it is required for insurance and reinsurance contracts that do not transfer [insurance risk](https://asc.understandingaccounting.org/glossary/i/#insurance-risk "The risk arising from uncertainties about both underwriting risk and timing risk. Actual or imputed investment returns are not an element of insurance risk. Insurance risk is fortuitous; the possibility of adverse events occurring is outside the control of the insured."). These contracts may be prospective or retroactive in nature. ##### [340-30-05-2](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:96a233ca5e2d988229ee2eda9af672b8e4c8574613660ed497092cfd65ac2347 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The transfer of insurance risk requires transferring both [timing risk](https://asc.understandingaccounting.org/glossary/t/#timing-risk "The risk arising from uncertainties about the timing of the receipt and payments of the net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract.") and [underwriting risk](https://asc.understandingaccounting.org/glossary/u/#underwriting-risk "The risk arising from uncertainties about the ultimate amount of net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract."). Therefore, four possible categories for deposit arrangements have been identified as follows: 1. a An insurance or reinsurance contract that transfers only significant timing risk. 2. b An insurance or reinsurance contract that transfers only significant underwriting risk. 3. c An insurance or reinsurance contract that transfers neither significant timing nor significant underwriting risk. 4. d An insurance or reinsurance contract with an indeterminate risk. #### An Insurance or Reinsurance Contract that Transfers Only Significant Timing Risk ##### [340-30-05-3](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:7dd23d36c84f03cb32fd74375883dbe6acce65feff02caa1c25710ac97d4e451 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For an insurance or reinsurance contract to be considered to have transferred significant timing risk, the timing of the loss reimbursement under the contract must be based on the timing of the loss event. ##### [340-30-05-4](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:d6372ba1e80077df0e7b05a95f17e4655bfe08cbce2157987d6215928e07aa5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The timing of the loss reimbursement under an insurance contract would be based on the timing of the payment with respect to the loss event. For reinsurance contracts, the timing of the loss reimbursement under the contract would be based on the timing of payment by the insured (reinsured) of the underlying loss, as well as when recovery is expected from the reinsurer. ##### [340-30-05-5](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:55de193a8394b938b5b23516b52c64580fc9ac6ef1a753dd7949d108ae502f4c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insurance or reinsurance contract that transfers only significant timing risk limits the amount of underwriting risk to which the insurer or reinsurer is subject and is commonly entered into by the insured or [ceding entity](https://asc.understandingaccounting.org/glossary/c/#ceding-entity "The party that pays a reinsurance premium in a reinsurance transaction. The ceding entity receives the right to reimbursement from the assuming entity under the terms of the reinsurance contract.") to provide liquidity. These limitations may result in an insufficient transfer of insurance risk. For example, insurance and reinsurance contracts that provide for [experience adjustments](https://asc.understandingaccounting.org/glossary/e/#experience-adjustment "A provision in an insurance or reinsurance contract that modifies the premium, coverage, commission, or a combination of the three, in whole or in part, based on experience under the contract.") may indicate that a sufficient amount of underwriting risk has not been transferred. The recovery of the amount of the initial deposit for a contract that transfers only significant timing risk is not substantially dependent on future loss experience of the insured. #### An Insurance or Reinsurance Contract that Transfers Only Significant Underwriting Risk ##### [340-30-05-6](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:b60ad1dd2304bbc1dfe2a3cbe871e4a01229e863f1324b103e6ec9857c24eef1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For an insurance or reinsurance contract to be considered to have transferred significant underwriting risk, the probability of a significant variation in the amount of payments under the insurance or reinsurance contract must be more than remote. Such variation must also result from variation in the insured's losses, and it must be at least reasonably possible that the insurer will realize a significant loss from the transaction. An insurance or reinsurance contract that transfers only significant underwriting risk may be entered into to lessen the overall economic risks associated with the contract and permit a greater amount of coverage than would otherwise be obtainable for a comparable premium. Features in insurance or reinsurance contracts that transfer only significant underwriting risk limit the uncertainties about the timing of the receipt and payment of cash flow, thus limiting the amount of timing risk assumed by the insurer. A delayed reimbursement of losses by the insurer is a possible indication that timing risk has not been transferred. Unlike insurance and reinsurance contracts that transfer only significant timing risk, the recovery of the amount of the initial deposit for an insurance or reinsurance contract that transfers only significant underwriting risk is substantially dependent on the future loss experience of the insured. Depending on such experience, the initial deposit may be recovered or the recovery may be significantly more or less than the original deposit. #### An Insurance or Reinsurance Contract that Transfers Neither Significant Timing nor Significant Underwriting Risk ##### [340-30-05-7](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:dc1294868d46212d09fa1e67105c6a9e63402f16216cf02c96912848ce058504 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Insurance and reinsurance contracts that transfer neither significant timing nor significant underwriting risk are expected to be rare. #### An Insurance or Reinsurance Contract with an Indeterminate Risk ##### [340-30-05-8](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:56c2b5993d508606e693e52bb73922929da5fffd2fc0950354810eeb3100c9dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. These insurance and reinsurance contracts have uncertain terms, or there is insufficient information to reasonably estimate and allocate premiums in proportion to the protection provided. For example, certain insurance and reinsurance contracts allow the insured to obtain some degree of coverage for multiple years without exposing the insurer to a defined level of insurance risk each year. Uncertainties surrounding these insurance and reinsurance contracts are analogous to those often associated with foreign property and liability reinsurance as addressed in the Reinsurance Contracts Subsections of Subtopic 944-605. Source downloaded (UTC): 2026-09-09T23:55:45.457Z to 2026-09-09T23:55:45.457Z Record version: sha256:2c1ff41de22200eaeef741dc1c55f32a1790c139cc23722a49e6fba8341a4b87 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/340/30/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [340-30-15-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:45.457Z to 2026-09-09T23:55:45.457Z Record version: sha256:5767da048775af227b5be316af41d8ebfa4f62e65014d4d499840e7a8bd4bd2b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 340-10-15, with specific qualifications and exceptions noted below. #### Entities ##### [340-30-15-2](https://asc.understandingaccounting.org/asc/340/30/#340-30-15-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:45.457Z to 2026-09-09T23:55:45.457Z Record version: sha256:92b64b664abdaa294ec6b34c8113e20d0863f680e5f121178cbbccfed90a8212 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to the following entities: 1. a The insured and the insurer in an insurance contract 2. b The [ceding](https://asc.understandingaccounting.org/glossary/c/#ceding-entity "The party that pays a reinsurance premium in a reinsurance transaction. The ceding entity receives the right to reimbursement from the assuming entity under the terms of the reinsurance contract.") and [assuming entity](https://asc.understandingaccounting.org/glossary/a/#assuming-entity "The party that receives a reinsurance premium in a reinsurance transaction. The assuming entity (or reinsurer) accepts an obligation to reimburse a ceding entity under the terms of the reinsurance contract.") in a [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contract. #### Transactions ##### [340-30-15-3](https://asc.understandingaccounting.org/asc/340/30/#340-30-15-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:45.457Z to 2026-09-09T23:55:45.457Z Record version: sha256:7bf478833c370daa041f86e5472135904256f1bbb328e7aa354ec83d2505b8cd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to the following kinds of insurance and reinsurance contracts: 1. a Short-duration insurance and reinsurance contracts that do not transfer [insurance risk](https://asc.understandingaccounting.org/glossary/i/#insurance-risk "The risk arising from uncertainties about both underwriting risk and timing risk. Actual or imputed investment returns are not an element of insurance risk. Insurance risk is fortuitous; the possibility of adverse events occurring is outside the control of the insured.") as described in paragraph [720-20-25-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-1) and, for reinsurance contracts, as described in Section 944-20-15 2. b Multiple-year insurance and reinsurance contracts that do not transfer insurance risk or for which insurance risk transfer is not determinable. ##### [340-30-15-4](https://asc.understandingaccounting.org/asc/340/30/#340-30-15-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:45.457Z to 2026-09-09T23:55:45.457Z Record version: sha256:85b173719eaba5641968e031ca31765c76bd5a1680202247c31f2da83522b4bf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to the following transactions and activities: 1. a Long-duration life and health insurance contracts that do not indemnify against mortality or morbidity risk shall be accounted for as investment contracts under Topic 944. Therefore, such contracts are not covered by this Subtopic. Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:b20d616f7e2caadf6fd02425c2c15c5bf422495eb27f12cca87104a9b61725f0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/340/30/#25-recognition) SEC content: no #### Deposit Asset or Liability Relating to Insurance and Reinsurance Contracts Accounted for Under Deposit Accounting ##### [340-30-25-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:69695d83180478d03c16cf134d8418eee2d86cc105c237c806a1ef099eb896b9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At inception, a deposit asset or liability shall be recognized for insurance and [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contracts accounted for under deposit accounting. ##### [340-30-25-2](https://asc.understandingaccounting.org/asc/340/30/#340-30-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:0a18d203c60320765bd781633379445e4cc3ab79c685ea8aa7d77c983301f5b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Sections 340-30-30 and 340-30-35 for guidance relating to the measurement of insurance and reinsurance contracts that transfer: 1. a Only significant [timing risk](https://asc.understandingaccounting.org/glossary/t/#timing-risk "The risk arising from uncertainties about the timing of the receipt and payments of the net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract.") 2. b Neither significant timing nor significant [underwriting risk](https://asc.understandingaccounting.org/glossary/u/#underwriting-risk "The risk arising from uncertainties about the ultimate amount of net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract.") 3. c Only significant underwriting risk. #### Insurance and Reinsurance Contracts with Indeterminate Risk ##### [340-30-25-3](https://asc.understandingaccounting.org/asc/340/30/#340-30-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:29909af9d8ad88328a6504ac1f7dcff15303e5d962d0ff0df32ecb6cda131a4a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Uncertainties surrounding insurance and reinsurance contracts with indeterminate risk are analogous to those often associated with foreign property and liability reinsurance as addressed in the Reinsurance Contracts Subsections of Subtopic 944-605. As a result, that guidance regarding the open-year method shall be followed. ##### [340-30-25-4](https://asc.understandingaccounting.org/asc/340/30/#340-30-25-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:63a9e67fe3838fbdda0b9a5db87b1abda428068c41b69ed9d8e164b3cb8b4ba8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under the open-year method, the effects of the contracts are not included in the determination of net income until sufficient information becomes available to reasonably estimate and allocate premiums. The open-year method requires that these effects be aggregated in the balance sheet. ##### [340-30-25-5](https://asc.understandingaccounting.org/asc/340/30/#340-30-25-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:daca401161c682f22b405ba2eb72d1d4da7586eeecbdfa692a6563ee3c7afe90 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The open-year method shall not, however, be used to defer losses that otherwise would be recognized pursuant to Subtopic 450-20. ##### [340-30-25-6](https://asc.understandingaccounting.org/asc/340/30/#340-30-25-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:604c960910b49aa21ad4c4701034ebb0e913797cb5a786e318a70856cf137ad7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If sufficient information becomes available to reasonably estimate and allocate premiums, the insurance or reinsurance contract with indeterminate risk shall be reclassified into one of the three following categories, as appropriate, and accounted for accordingly: 1. a Transfers that have neither significant timing nor significant underwriting risk 2. b Transfers that have only significant timing risk 3. c Transfers that have only significant underwriting risk. ##### [340-30-25-7](https://asc.understandingaccounting.org/asc/340/30/#340-30-25-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:d2257de6bec56f83c62c13d9b5332c988213a6160a3b594388ed202596b4023a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The change in deposit assets or liabilities that result if sufficient information becomes available is treated as a change in accounting estimate in accordance with Topic 250. #### Short-Duration Reinsurance Contracts ##### [340-30-25-8](https://asc.understandingaccounting.org/asc/340/30/#340-30-25-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:49.483Z to 2026-09-09T23:55:49.483Z Record version: sha256:b63886d44616b22ffe1a80eef833a8f28dbc7487c894783fff8b86136e96406b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a short-duration reinsurance contract does not meet either the condition in paragraph [944-20-15-41](https://asc.understandingaccounting.org/asc/944/20/#944-20-15-41) or the exception in paragraph [944-20-15-53](https://asc.understandingaccounting.org/asc/944/20/#944-20-15-53) but transfers significant [insurance risk](https://asc.understandingaccounting.org/glossary/i/#insurance-risk "The risk arising from uncertainties about both underwriting risk and timing risk. Actual or imputed investment returns are not an element of insurance risk. Insurance risk is fortuitous; the possibility of adverse events occurring is outside the control of the insured."), then the accounting for contracts that transfer only significant underwriting risk shall be followed as discussed in paragraphs [340-30-35-5 through 35-7](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-5) and [340-30-45-3 through 45-5](https://asc.understandingaccounting.org/asc/340/30/#340-30-45-3) . Source downloaded (UTC): 2026-09-09T23:55:53.141Z to 2026-09-09T23:55:53.141Z Record version: sha256:7c926440a5a0d63b241de5ec36a3f27b4b05243504161ad035cace6834b4918d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/340/30/#30-initial-measurement) SEC content: no #### Deposit Asset or Liability Related to Insurance and Reinsurance Contracts Accounted for Under Deposit Accounting ##### [340-30-30-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-30-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:53.141Z to 2026-09-09T23:55:53.141Z Record version: sha256:3ea607d73aae4d8100db981de234124058236c13eb805322f17dc144de4905a6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At inception, a deposit asset or liability shall be measured based on the consideration paid or received, less any explicitly identified premiums or fees to be retained by the insurer or reinsurer, irrespective of the experience of the contract. Accounting for such fees shall be based on the terms of the contract. Source downloaded (UTC): 2026-09-09T23:55:55.079Z to 2026-09-09T23:55:55.079Z Record version: sha256:737c9d6f4448ee54ac1f39fd1e32513e0083320fb5d2cdbda01f6f14a3081e62 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/340/30/#35-subsequent-measurement) SEC content: no #### Insurance and Reinsurance Contracts that Transfer Only Significant Timing Risk and Insurance and Reinsurance Contracts that Transfer Neither Significant Timing nor Significant Underwriting Risk ##### [340-30-35-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:55.079Z to 2026-09-09T23:55:55.079Z Record version: sha256:0df4f760c9967370531a730966121dc9d1bdac6bcdcc9ce64a398ca59c11196b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For insurance and [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contracts that transfer only significant [timing risk](https://asc.understandingaccounting.org/glossary/t/#timing-risk "The risk arising from uncertainties about the timing of the receipt and payments of the net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract.") or that transfer neither significant timing nor significant [underwriting risk](https://asc.understandingaccounting.org/glossary/u/#underwriting-risk "The risk arising from uncertainties about the ultimate amount of net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract."), the amount of the deposit asset or liability shall be adjusted at subsequent reporting dates by calculating the effective yield on the deposit to reflect actual payments to date and expected future payments (as discussed in paragraph [340-30-35-3](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-3)), with a corresponding credit or charge to interest income or expense (see Examples 1 through 3 \[paragraphs [340-30-55-2 through 55-7\])](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-2)). ##### [340-30-35-2](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:55.079Z to 2026-09-09T23:55:55.079Z Record version: sha256:1498695bf8001dca6dd3497c02d9e16ed9f2bec96c165f69356a446ca9eaf2ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This approach is consistent with the interest method described in Subtopics 310-20 and 835-30. ##### [340-30-35-3](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:55.079Z to 2026-09-09T23:55:55.079Z Record version: sha256:db765bf634db2a6c39180631fc7b8add6a8bb480eafbb9c45dc34102214ca1bc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The calculation of the effective yield shall use the estimated amount and timing of cash flows. Consistent with paragraph [310-20-35-26](https://asc.understandingaccounting.org/asc/310/20/#310-20-35-26), if a change in the actual or estimated timing or amount of cash flows occurs, the effective yield shall be recalculated to reflect the revised actual or estimated cash flows. The deposit shall be adjusted to the amount that would have existed at the balance-sheet date had the new effective yield been applied since the inception of the insurance or reinsurance contract. ##### [340-30-35-4](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:55.079Z to 2026-09-09T23:55:55.079Z Record version: sha256:9007401af283d43e3c4b61165a5ab0be18c4b78fdf1c48e5afccc1755b2e0eb4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Significant changes in the expected amounts of aggregate cash flows are expected to occur infrequently because of the nature of these kinds of contracts. Should a significant change occur in the total amount of actual or estimated cash flows, the entity shall determine whether the change indicates that the contract does include significant underwriting risk and therefore shall be converted to the accounting for contracts that transfer only significant underwriting risk (see paragraphs [340-30-35-5](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-5) and [340-30-45-3 through 45-5](https://asc.understandingaccounting.org/asc/340/30/#340-30-45-3) ). In addition, a contract that transfers only significant timing risk, which subsequently is determined also to transfer significant underwriting risk, cannot be accounted for under insurance or reinsurance accounting when the revised determination is made. #### Insurance and Reinsurance Contracts that Transfer Only Significant Underwriting Risk ##### [340-30-35-5](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:55.079Z to 2026-09-09T23:55:55.079Z Record version: sha256:94f9a2bdf309c3bc53db232b081d67dc78543db333efa24f36f3bed11e6639eb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Until such time as a loss is incurred that will be reimbursed under an insurance or reinsurance contract that transfers only significant underwriting risk, the deposit shall be measured based on the unexpired portion of the coverage provided. Once a loss is incurred that will be reimbursed under such a contract, then the deposit shall be measured by the present value of the expected future cash flows arising from the contract plus the remaining unexpired portion of the coverage provided (see Example 4 \[paragraph [340-30-55-8](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-8)\]). #### Insurance and Reinsurance Contracts that Transfer Only Significant Underwriting Risk—Discount Rate ##### [340-30-35-6](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:55.079Z to 2026-09-09T23:55:55.079Z Record version: sha256:9c71c7c06ba5380f85aba9715f919e96e795108b47dae10a81bed6cb505d4617 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For the insured or [ceding entity](https://asc.understandingaccounting.org/glossary/c/#ceding-entity "The party that pays a reinsurance premium in a reinsurance transaction. The ceding entity receives the right to reimbursement from the assuming entity under the terms of the reinsurance contract."), the discount rate used to determine the deposit asset shall be the current rate on U.S. government obligations with similar cash-flow characteristics, adjusted for default risk. Consideration of the default risk, if any, shall be based on the assessment of the creditworthiness of the insurer. For the insurer or [assuming entity](https://asc.understandingaccounting.org/glossary/a/#assuming-entity "The party that receives a reinsurance premium in a reinsurance transaction. The assuming entity (or reinsurer) accepts an obligation to reimburse a ceding entity under the terms of the reinsurance contract."), the discount rate used to determine the deposit liability shall be the current rate on U.S. government obligations with similar cash-flow characteristics. These rates shall be established at the date of each loss incurred and used for the remaining life of the contract and shall not be changed. ##### [340-30-35-7](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:55.079Z to 2026-09-09T23:55:55.079Z Record version: sha256:2cf974a7f0578579e3230bea9188ae2cced274fa6ec08feededa04c9f4eccc1c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If numerous losses occur, the use of average rates is permitted because establishing individual rates might require detailed record keeping and computations that could be burdensome and unnecessary to produce reasonable approximations of the results. Source downloaded (UTC): 2026-09-09T23:55:57.511Z to 2026-09-09T23:55:57.511Z Record version: sha256:a52d0f75aba08cbca1d280412abb535a10f2ce4ed6dda17e866f7011523aeae1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/340/30/#45-other-presentation-matters) SEC content: no #### Deposit Asset and Liability ##### [340-30-45-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-45-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:57.511Z to 2026-09-09T23:55:57.511Z Record version: sha256:20c21e10ab24caf5499fbcdef06e04e3ce5b516534e5d2b390618bd2472891a0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Deposit assets and liabilities shall be reported on a gross basis, unless the right of offset exists as defined in Subtopic 210-20. The accounting by the insured and insurer are symmetrical, except as noted in paragraphs [340-30-35-6 through 35-7](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-6) . #### Insurance and Reinsurance Contracts that Transfer Only Significant Timing Risk and Insurance and Reinsurance Contracts that Transfer Neither Timing nor Significant Underwriting Risk ##### [340-30-45-2](https://asc.understandingaccounting.org/asc/340/30/#340-30-45-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:57.511Z to 2026-09-09T23:55:57.511Z Record version: sha256:03b1b01cf993a6efde6ee0fcb29fe1e62c68152201f7eebf422c5a5103f9b6ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Changes in the carrying amount of the deposit shall be reported as interest income or interest expense. #### Insurance and Reinsurance Contracts that Transfer Only Significant Underwriting Risk ##### [340-30-45-3](https://asc.understandingaccounting.org/asc/340/30/#340-30-45-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:57.511Z to 2026-09-09T23:55:57.511Z Record version: sha256:1eafb3d39b019ca11bed8114427713ae56413ac8b66749bb54fd2ad7e524916c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Changes in the recorded amount of the deposit, other than the unexpired portion of the coverage provided, arising from an insurance or [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contract that transfers only significant [underwriting risk](https://asc.understandingaccounting.org/glossary/u/#underwriting-risk "The risk arising from uncertainties about the ultimate amount of net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract.") shall be recorded in an insured's income statement as an offset against the loss recorded by the insured that will be reimbursed under the insurance or reinsurance contract and in an insurer's income statement as an incurred loss. ##### [340-30-45-4](https://asc.understandingaccounting.org/asc/340/30/#340-30-45-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:57.511Z to 2026-09-09T23:55:57.511Z Record version: sha256:2ca6ba142f60cb4f0719ce5ede2cc0920977648a298c61c8778f460924e11657 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Insurance entities shall record the reduction in the deposit related to the unexpired portion of the coverage provided as an adjustment to incurred losses. ##### [340-30-45-5](https://asc.understandingaccounting.org/asc/340/30/#340-30-45-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:57.511Z to 2026-09-09T23:55:57.511Z Record version: sha256:2db9f64e4fab075b64853a18e0278fe122053a773f8fd65f6a2829a56f7a92ba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the insured is an entity other than an insurance entity, the reduction in the deposit related to the unexpired portion of the coverage provided shall be recorded as an expense. Source downloaded (UTC): 2026-09-09T23:56:00.194Z to 2026-09-09T23:56:00.194Z Record version: sha256:5f867f8f9543c2bf717823ec8d0d2d266712c27e9864bffa9095a30245eb2f1a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/340/30/#50-disclosure) SEC content: no #### Deposit Asset or Liability ##### [340-30-50-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-50-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:00.194Z to 2026-09-09T23:56:00.194Z Record version: sha256:4f974440b89b3a876c954f61b7e4684c27f41b57e862e368066968413fca3d73 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entities shall disclose a description of the contracts accounted for as deposits and the separate amounts of total deposit assets and total deposit liabilities reported in the statement of financial position. #### Insurance and Reinsurance Contracts that Transfer Only Underwriting Risk ##### [340-30-50-2](https://asc.understandingaccounting.org/asc/340/30/#340-30-50-2) Pending content: yes Source downloaded (UTC): 2026-09-09T23:56:00.194Z to 2026-09-09T23:56:00.194Z Record version: sha256:38121865683cf3af42bf0581f5f3221a0fc19a982eac803b452d75397a3aabb2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Insurance entities shall disclose the following information regarding the changes in the recorded amount of the deposit arising from an insurance or [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contract that transfers only significant [underwriting risk](https://asc.understandingaccounting.org/glossary/u/#underwriting-risk "The risk arising from uncertainties about the ultimate amount of net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract."): 1. a The present values of initial expected recoveries that will be reimbursed under the insurance or reinsurance contracts that have been recorded as an adjustment to incurred losses 2. b Any adjustment of amounts initially recognized for expected recoveries. The individual components of the adjustment (meaning, interest accrual, the present value of additional expected recoveries, and the present value of reductions in expected recoveries) shall be disclosed separately. 3. c The amortization expense attributable to the expiration of coverage provided under the contract. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [220-40-65-1](https://asc.understandingaccounting.org/asc/220/40/#220-40-65-1)Insurance entities shall disclose the following information regarding the changes in the recorded amount of the deposit arising from an insurance or [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contract that transfers only significant [underwriting risk](https://asc.understandingaccounting.org/glossary/u/#underwriting-risk "The risk arising from uncertainties about the ultimate amount of net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract."): 1. a The present values of initial expected recoveries that will be reimbursed under the insurance or reinsurance contracts that have been recorded as an adjustment to incurred losses 2. b Any adjustment of amounts initially recognized for expected recoveries. The individual components of the adjustment (meaning, interest accrual, the present value of additional expected recoveries, and the present value of reductions in expected recoveries) shall be disclosed separately. 3. c The amortization expense attributable to the expiration of coverage provided under the contract. See paragraphs [220-40-50-21 through 50-25](https://asc.understandingaccounting.org/asc/220/40/#220-40-50-21) for additional disclosure requirements. Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:fec48753bb22912c449760d142461cd97e816d75bfd05be2f33e326695a3b1cf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/340/30/#55-implementation-guidance-and-illustrations) SEC content: no #### Illustrations ##### [340-30-55-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:116aad16b7d09bd2557ef8e7216e139fc9a6346a36fdff3cfcca503628313c07 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Examples illustrate the application of the guidance in this Subtopic. It shall not be construed that any aspect of the illustrations establishes or changes requirements as to when deposit accounting should be applied. Rather, the Examples illustrate how deposit accounting is to be applied when it is determined that it should be applied under other accounting literature. These Examples illustrate the accounting by the insured. The accounting by the insurer would be symmetrical, except as noted in paragraphs [340-30-35-6 through 35-7](https://asc.understandingaccounting.org/asc/340/30/#340-30-35-6) . ##### [340-30-55-2](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:7012fb8c2b1a98b7d322846442d0e9edfc2f3fa7784fdf63cb50e67f3797c9ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the accounting by the insured for an insurance or [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contract that transfers neither significant timing nor significant [underwriting risk](https://asc.understandingaccounting.org/glossary/u/#underwriting-risk "The risk arising from uncertainties about the ultimate amount of net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract."). The facts are as shown in the following table. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-86A135AC-0683-4C02-8865-0A9DDAC1C957-low.gif) Premium "$1,000 " Coverage period 1 year Expected recoveries $250 at the end of each year for 5 years Implicit interest rate 8 percent (a) (a) "Present value of $250 per year for 5 years at 8 percent = $1,000." ##### [340-30-55-3](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:70a6d350c02050b70fd68076a02558b09cfe5db68b812117ec74db89b4e35142 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At contract inception, the insured records a $1,000 asset. Changes in the amount or timing of cash flows are not anticipated. As they are received, cash recoveries reduce the carrying amount of the deposit, and the carrying amount of the deposit is increased at each reporting date by the amount of the interest earned during the period. The Example assumes that the entity is reporting related financial information as of the end of each year, as shown in the following table. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-F0299C64-D9D5-4BAB-8006-5DA35744FBA9-low.gif) Description 8 Percent Interest Income Cash Recoveries Deposit Balance Initial payment " $1,000 " Year 1 $80 " 1,080 " End of Year 1 $(250) 830 Year 2 66 896 End of Year 2 (250) 646 Year 3 52 698 End of Year 3 (250) 448 Year 4 36 484 End of Year 4 (250) 234 Year 5 16 250 End of Year 5 (250) - Totals $250 " $(1,250)" $- ##### [340-30-55-4](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:5d615074a4459d74517af9e8db02a0722a605386563ca97f5020a6a32bbc8a0b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the accounting by the insured for an insurance or reinsurance contract that transfers only significant [timing risk](https://asc.understandingaccounting.org/glossary/t/#timing-risk "The risk arising from uncertainties about the timing of the receipt and payments of the net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract."). The facts are as shown in the following table. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-94C9B8F7-A296-4CA5-8209-330EAFD2FB7C-low.gif) Premium "$1,000 " Coverage period 1 year Initial expected recoveries $225 per year (at end of year) for 5 years Initial implicit rate 4 percent (a) (a) "Present value of $225 per year for 5 years at 4 percent = $1,000." ##### [340-30-55-5](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:2e3d5f192d6c54e8aac50d3abf58fd06d78d850ecca37e56a0be8257ba29f8a1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This implicit rate often will be less than the current risk-free rate because of the uncertainties as to the timing of cash flows in the insurance or reinsurance contract. ##### [340-30-55-6](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:55b5d87b55f29cfcc49e469d5f6f22cb76d2bd63f61a675c27ae5508fab5bd3e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At contract inception, the insured records a $1,000 asset. Though the total amount ($1,125) is likely to be paid, changes in estimates of the timing of cash flows are expected. At each subsequent reporting date, the amount of the deposit would be increased by the amount of interest earned during the period, calculated using the estimated future cash flows to determine the then-current implicit discount rate (this is consistent with the retrospective approach in applying the interest method). At the end of Year 2, the timing of anticipated recoveries under the insurance or reinsurance contract is revised. A reevaluation of the implicit interest rate produces a rate of 3.63 percent and an asset of $640 at the end of the year. Given the change in the expected timing of cash flows at the end of Year 2, the carrying amount of the asset would be calculated as shown in the following table. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-90562D98-62DF-41BD-B1BE-E0257A8FD84A-low.gif) Description Interest Income Cash Recoveries Deposit Balance Initial payment " $1,000 " Year 1 (4 percent) (a) $40 " 1,040 " End of Year 1 $(225) 815 Year 2 (4 percent) 33 848 End of Year 2 (200) 648 Yield adjustment (8) 640 Year 3 (3.63 percent) 23 663 End of Year 3 (175) 488 Year 4 (3.63 percent) 18 506 End of Year 4 (175) 331 Year 5 (3.63 percent) 12 343 End of Year 5 (175) 168 Year 6 (3.63 percent) 7 175 End of Year 6 (175) - Totals $125 " $(1,125)" $- (a) Implicit rate at the inception of the insurance or reinsurance contract. ##### [340-30-55-7](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:09131e33852ac9a534f5d2fbe99b1cb28ea804cc7e3c51ee480551104dc46b51 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example builds on Examples 1 and 2 (see paragraphs [340-30-55-2 through 55-6](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-2) ). It uses the same assumptions and facts as Example 2 for the first two years; however, at the end of Year 3, the estimated recovery is increased from $1,125 to $1,950 (with the remaining recovery to be $450 per year for the remaining 3 years). For purposes of this Example, assume the magnitude of the change in the estimated recovery is such that a determination should be reached that the contract does include significant underwriting risk. The risk-free rate of interest at Year 1 is 6 percent adjusted for default risk. In addition, this rate would be utilized when appropriate for the life of the contract. The following table illustrates the accounting for a conversion from a contract that transfers neither significant timing risk nor significant underwriting risk or a contract that transfers only significant timing risk to a contract that transfers significant underwriting risk. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-BE45F953-1F7A-4453-A90A-CE2C7478B1A3-low.gif) Description Interest Income Offset to Recorded Losses Cash Recoveries at End of Year Deposit Balance Initial payment " $1,000 " Year 1 (4 percent) $40 $(225) 815 Year 2 (4 percent) 25 (a) (200) 640 Year 3 (3.63 percent) 23 (175) 488 Adjustment $715 (b) " 1,203 " (c) Year 4 (6 percent) 72 (450) 825 Year 5 (6 percent) 50 (450) 425 Year 6 (6 percent) 25 (450) - Totals $88 $862 " $(1,950)" $- (a) The interest income adjustment at 4 percent of $33 less the yield adjustment of $8 equals $25. (b) "At the end of Year 3, there is a change in the estimated recovery to $1950. The payment of the remaining losses will occur over 3 years, in Years 4, 5, and 6." (c) The present value of $450 per year for 3 years discounted at 6 percent (the risk-free rate at the time of the loss adjusted for default risk). ##### [340-30-55-8](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:59ca0f75ea9c32f5b0a6af923dc02df59401d1554663581962bafe9d05ebe756 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the accounting by the insured for an insurance or reinsurance contract that transfers only significant underwriting risk. The facts are as shown in the following table. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-77EC43FE-BAF6-4A02-8678-6CB56571D0DC-low.gif) Initial premium "$1,000 " Coverage period 1 year Expected recoveries "Could aggregate up to $10,000 with none paid prior to Year 8 regardless of when the insured incurs or pays a loss" ##### [340-30-55-9](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:c6975455df05e38505085ad9e9012d2f5ad246b5473b2d5e2893f7e7631efca7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A delayed reimbursement clause, which provides that the full amount will be paid to the insured or [ceding entity](https://asc.understandingaccounting.org/glossary/c/#ceding-entity "The party that pays a reinsurance premium in a reinsurance transaction. The ceding entity receives the right to reimbursement from the assuming entity under the terms of the reinsurance contract.") at the end of Year 8, mitigates timing risk. A $5,000 loss is incurred at the end of Year 1 and is expected to be recovered at the end of Year 8. The risk-free rate of interest in Year 1 for the period from the loss to the expected payment date, adjusted for default risk, is 6 percent. (For the insurer, the risk-free rate would be used but it would not be adjusted for default risk.) At the end of Year 3, the estimated loss is increased from $5,000 to $6,000. ##### [340-30-55-10](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:f05b2aed508f8bf32f65e6e6cea7b11fe097c2ce7fd36637589fea3de1a8f779 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At contract inception, the insured records a $1,000 asset. The $1,000 amount is amortized over the coverage period of 1 year. If the $5,000 loss is incurred, the insured increases the amount of the asset by the present value of the $5,000. (Note that the insured has recorded the entire $5,000 loss from the underlying event in the same period.) At each subsequent reporting date, the portion of the carrying amount of the asset attributable to the incurred loss would be recalculated by discounting the estimated future cash flows. ##### [340-30-55-11](https://asc.understandingaccounting.org/asc/340/30/#340-30-55-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:56:01.915Z to 2026-09-09T23:56:01.915Z Record version: sha256:5e46e9aaa3031308a2cb3a7452db600dee22964f915d2b67eca7755ce1386992 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The carrying amount of the asset would be calculated as shown in the following table. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-B2719F5A-EC7A-4ABD-B83E-312F0E2E9BF2-low.gif) Description Amortization Offset to Recorded Losses Cash Recoveries at End of Year Deposit Balance Initial payment " $1,000 " Amortization " $1,000 " - Year 1 " $3,325 " (a) " 3,325 " (b) Year 2 200 " 3,525 " Year 3 211 " 3,736 " Adjustment 747 " 4,483 " (c) Year 4 270 " 4,753 " Year 5 284 " 5,037 " Year 6 303 " 5,340 " Year 7 320 " 5,660 " Year 8 340 " $6,000 " - Totals " $1,000 " " $6,000 " " $6,000 " $- (a) The loss occurred on the last day of the year. (b) "The present value of $5,000 received after 7 years discounted at 6 percent. At the end of Year 1, there is no remaining deposit applicable to the unexpired portion of the coverage because it is a 1-year contract." (c) "The present value of $6,000 received after 5 years discounted at 6 percent."