ASC

ASC 340-944

Financial Services—Insurance

340 Other Assets and Deferred Costs

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In brief

IntermediateRecognitionPresentationIndustry-specificFinancial statement presentation

ASC 340-944 governs how insurance entities account for and report certain deferred costs and prepaid expenses, organized into a General Subsection and a Reinsurance Contracts Subsection. Its operative rule is that amounts an insurer pays a reinsurer for the unexpired portion of reinsured contracts — prepaid reinsurance premiums — must be reported separately as assets (340-944-25-1), rather than netted against related liabilities.

Key points (5)
  • The Subtopic addresses accounting and financial reporting for certain deferred costs and prepaid expenses of insurance entities, split into General and Reinsurance Contracts Subsections (340-944-05-1).
  • Scope follows the Overall Insurance Subtopic's scope and scope exceptions in Section 944-10-15 (340-944-15-1).
  • The Reinsurance Contracts Subsections apply only to reinsurance contracts, with identification of a reinsurance contract governed by the Reinsurance Contracts Subsection of Section 944-20-15 (340-944-15-3).
  • Amounts paid to the reinsurer relating to the unexpired portion of reinsured contracts (prepaid reinsurance premiums) shall be reported separately as assets (340-944-25-1).
  • The separate-asset requirement reflects gross presentation: the ceding entity does not offset prepaid reinsurance premiums against unearned premium or other insurance liabilities.

For students. The one rule to remember is gross reporting: prepaid reinsurance premiums are a separate asset, not a reduction of the insurer's unearned premium liability — a common exam trap is netting reinsurance recoverables and prepaid premiums against direct insurance liabilities.

prepaid reinsurance premiumsreinsurance contractceding entitydeferred costsunexpired portion of reinsured contractsgross presentation of reinsuranceinsurance entity

Machine-generated study aid for ASC 340-944. Check the source paragraphs below.

340-944-05Overview and Background

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340-944-05-1
This Subtopic provides guidance to insurance entities on the accounting for and financial reporting of certain deferred costs and prepaid expenses. The guidance in this Subtopic is provided in the following two Subsections:
  1. a
    General
  2. b
    Reinsurance contracts.

Reinsurance Contracts

340-944-05-2
This Subtopic provides guidance to insurance entities on the accounting for and financial reporting of certain deferred costs and prepaid expenses related to reinsurance contracts.

340-944-15Scope and Scope Exceptions

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Overall Guidance

340-944-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 944-10-15.

Reinsurance Contracts

340-944-15-2
The Reinsurance Contracts Subsections of this Subtopic follow the same Scope and Scope Exceptions as outlined in the General Subsection of this Section, with specific instrument qualifications noted below.

Instruments

340-944-15-3
The guidance in the Reinsurance Contracts Subsections of this Subtopic applies only to reinsurance contracts. For guidance on identifying a reinsurance contract, see the Reinsurance Contracts Subsection of Section 944-20-15.

340-944-25Recognition

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Reinsurance

Prepaid Insurance Premiums

340-944-25-1
Amounts paid to the reinsurer relating to the unexpired portion of reinsured contracts (prepaid reinsurance premiums) shall be reported separately as assets.

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