# ASC 470-944-05: Debt — Financial Services—Insurance — 05 Overview and Background

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/470/944/#05-overview-and-background)

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): 2026-09-10T00:34:13.964Z to 2026-09-10T00:34:13.964Z

Record version: sha256:107f863f46298a9044c2cfa7cd4d1c384c445722b3b00f902afe3b673bc5d341

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


## ASC 470-944-05: 05 Overview and Background

[Read section](https://asc.understandingaccounting.org/asc/470/944/#05-overview-and-background)

SEC content: no

##### [470-944-05-1](https://asc.understandingaccounting.org/asc/470/944/#470-944-05-1)

Pending content: no

Source downloaded (UTC): 2026-09-10T00:34:13.964Z to 2026-09-10T00:34:13.964Z

Record version: sha256:fe28270641ede4e96427b1f48de647da05d3403c44c191c2ec6362063ccba897

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


This Subtopic provides guidance on accounting, financial statement presentation, and disclosure by the issuers of [surplus notes](https://asc.understandingaccounting.org/glossary/s/#surplus-notes "Surplus notes are financial instruments issued by insurance entities that are includable in surplus for statutory accounting purposes as prescribed or permitted by state laws and regulations."). The term surplus notes is the most common term applied to these financial instruments. Some jurisdictions refer to these financial instruments as certificates of contribution, surplus debentures, or capital notes. The following are some general characteristics of surplus notes:

1.  a
    
    Approval of the issuance by the domiciliary state insurance commissioner
    
2.  b
    
    Stated maturity date in most but not all cases
    
3.  c
    
    Scheduled interest payments
    
4.  d
    
    Approval of the payment of principal and interest by the domiciliary state insurance commissioner
    
5.  e
    
    Nonvoting
    
6.  f
    
    Subordinate to all claims except those of shareholders for stock entities
    
7.  g
    
    Subordinate to all claims except policyholder residuals for mutual entities (after policyholder liabilities are settled)
    
8.  h
    
    No or limited acceleration rights other than for rehabilitation, liquidation, or reorganization of the insurer by a governmental agency
    
9.  i
    
    Proceeds from issuance in the form of cash, cash equivalent, or some other asset with a [readily determinable fair value](https://asc.understandingaccounting.org/glossary/r/#readily-determinable-fair-value "An equity security has a readily determinable fair value if it meets any of the following conditions: The fair value of an equity security is readily determinable if sales prices or bid-and-asked quotations are currently available on a securities exchange registered with the U.S. Securities and Exchange Commission (SEC) or in the over-the-counter market, provided that those prices or quotations for the over-the-counter market are publicly reported by the National Association of Securities Dealers Automated Quotations systems or by OTC Markets Group Inc. Restricted stock meets that definition if the restriction terminates within one year. The fair value of an equity security traded only in a foreign market is readily determinable if that foreign market is of a breadth and scope comparable to one of the U.S. markets referred to above. The fair value of an equity security that is an investment in a mutual fund or in a structure similar to a mutual fund (that is, a limited partnership or a venture capital entity) is readily determinable if the fair value per share (unit) is determined and published and is the basis for current transactions.") satisfactory to the domiciliary state insurance commissioner.