# ASC 340-944: Other Assets and Deferred Costs — Financial Services—Insurance

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/340/944/)

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## ASC 340-944: Other Assets and Deferred Costs — Financial Services—Insurance

### Machine-generated study aids

```json
{
  "summary": "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": [
    "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."
  ],
  "categories": [
    "Recognition",
    "Presentation",
    "Industry-specific",
    "Financial statement presentation"
  ],
  "audience_level": "intermediate",
  "student_note": "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.",
  "related_topics": [
    "944-10",
    "944-20",
    "944-30",
    "944-40",
    "944-605",
    "340-10"
  ],
  "key_concepts": [
    "prepaid reinsurance premiums",
    "reinsurance contract",
    "ceding entity",
    "deferred costs",
    "unexpired portion of reinsured contracts",
    "gross presentation of reinsurance",
    "insurance entity"
  ]
}
```

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## ASC 340-944-05: 05 Overview and Background

[Read section](https://asc.understandingaccounting.org/asc/340/944/#05-overview-and-background)

SEC content: no

##### [340-944-05-1](https://asc.understandingaccounting.org/asc/340/944/#340-944-05-1)

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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](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.

### Reinsurance Contracts

##### [340-944-05-2](https://asc.understandingaccounting.org/asc/340/944/#340-944-05-2)

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This Subtopic provides guidance to insurance entities on the accounting for and financial reporting of certain deferred costs and prepaid expenses related to [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.

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## ASC 340-944-15: 15 Scope and Scope Exceptions

[Read section](https://asc.understandingaccounting.org/asc/340/944/#15-scope-and-scope-exceptions)

SEC content: no

#### Overall Guidance

##### [340-944-15-1](https://asc.understandingaccounting.org/asc/340/944/#340-944-15-1)

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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](https://asc.understandingaccounting.org/asc/340/944/#340-944-15-2)

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The Reinsurance Contracts Subsections of this Subtopic follow the same Scope and Scope Exceptions as outlined in the [General Subsection](https://asc.understandingaccounting.org/asc/340/944/#15-scope-and-scope-exceptions) of this Section, with specific instrument qualifications noted below.

#### Instruments

##### [340-944-15-3](https://asc.understandingaccounting.org/asc/340/944/#340-944-15-3)

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The guidance in the Reinsurance Contracts Subsections of this Subtopic applies only to [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. For guidance on identifying a reinsurance contract, see the [Reinsurance Contracts Subsection](https://asc.understandingaccounting.org/asc/944/20/#15-scope-and-scope-exceptions) of Section 944-20-15.

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## ASC 340-944-25: 25 Recognition

[Read section](https://asc.understandingaccounting.org/asc/340/944/#25-recognition)

SEC content: no

### Reinsurance

#### Prepaid Insurance Premiums

##### [340-944-25-1](https://asc.understandingaccounting.org/asc/340/944/#340-944-25-1)

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Amounts paid to the [reinsurer](https://asc.understandingaccounting.org/glossary/r/#reinsurer "The assuming entity in a reinsurance transaction.") relating to the unexpired portion of reinsured contracts ([prepaid reinsurance premiums](https://asc.understandingaccounting.org/glossary/p/#prepaid-reinsurance-premiums "Amounts paid to the reinsurer relating to the unexpired portion of reinsured contracts.")) shall be reported separately as assets.