# ASC 470-944: Debt — Financial Services—Insurance Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/470/944/) 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): 2026-09-10T00:34:11.077Z to 2026-09-10T00:34:31.491Z Record version: sha256:152e33b07b4272e48f27f04ec073deb246a8941377ef4a3dff0aa8fdbac5de10 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-944: Debt — Financial Services—Insurance ### Machine-generated study aids ```json { "summary": "This subtopic governs how an insurance entity that issues surplus notes (also called certificates of contribution, surplus debentures, or capital notes) accounts for them under GAAP. The core rule is that surplus notes are debt, not equity: they are presented as liabilities and interest is accrued over the note's life even though the domiciliary state insurance commissioner must approve each principal and interest payment (470-944-25-1, 35-1, 45-1).", "key_points": [ "Surplus notes shall be accounted for as debt instruments, and equity treatment is inappropriate (470-944-25-1).", "Typical characteristics include commissioner approval of issuance and of principal/interest payments, a stated maturity in most cases, scheduled interest, nonvoting status, deep subordination, and limited acceleration rights only on rehabilitation, liquidation, or reorganization (470-944-05-1).", "Interest shall be accrued over the life of the note irrespective of whether the domiciliary state insurance commissioner has approved interest and principal payments, and is expensed the same way as interest on other debt (470-944-35-1).", "Surplus notes shall be presented as liabilities on the issuer's financial statements (470-944-45-1).", "The issuer shall disclose the domiciliary state insurance commissioner's role and ability to approve or disapprove any interest and principal payments (470-944-50-1).", "The guidance applies only to issuers; it does not apply to investors in surplus notes (470-944-15-2), and otherwise follows the scope in Section 944-10-15 (470-944-15-1)." ], "categories": [ "Debt and equity", "Presentation", "Disclosure", "Industry-specific" ], "audience_level": "intermediate", "student_note": "Surplus notes are the classic GAAP-versus-statutory divergence: statutory accounting treats them as surplus (equity-like), but GAAP insists they are liabilities with accrued interest. The common misunderstanding is assuming that because the commissioner can block payments, no interest expense accrues — 470-944-35-1 says accrual continues regardless.", "related_topics": [ "944-10", "470-10", "480-10", "835-30", "944-405" ], "key_concepts": [ "surplus notes", "certificates of contribution", "domiciliary state insurance commissioner approval", "debt versus equity classification", "interest accrual", "subordination", "statutory surplus", "issuer disclosure" ] } ``` Source downloaded (UTC): 2026-09-10T00:34:11.077Z to 2026-09-10T00:34:11.077Z Record version: sha256:073b8dfa292373985754ec4c01e5688aa2d60e847c9f72a2ba09424f0c5fa5c3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-944-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/470/944/#00-status) SEC content: no ##### [470-944-00-1](https://asc.understandingaccounting.org/asc/470/944/#470-944-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:34:11.077Z to 2026-09-10T00:34:11.077Z Record version: sha256:c4312ffed0c707da0e9499ab06ecd19c8b89e1d1ecfa6e50c6bb21b5d30f1bf9 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
Readily Determinable Fair ValueAmendedAccounting Standards Update No. 2015-1006/12/2015
Readily Determinable Fair ValueAmendedAccounting Standards Update No. 2014-0603/14/2014
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. Source downloaded (UTC): 2026-09-10T00:34:17.071Z to 2026-09-10T00:34:17.071Z Record version: sha256:d536ea5216e783ec48f5006512da93e6de1d9faaa0a16232c60bbb9ab5d24fe8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-944-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/470/944/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [470-944-15-1](https://asc.understandingaccounting.org/asc/470/944/#470-944-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:34:17.071Z to 2026-09-10T00:34:17.071Z Record version: sha256:3dc33b6a4b19c3fae26ad0c366118d8bf50ac4cb330ba09bae9c71b317d7bbc0 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 944-10-15, with specific entity exceptions noted below. #### Entities ##### [470-944-15-2](https://asc.understandingaccounting.org/asc/470/944/#470-944-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:34:17.071Z to 2026-09-10T00:34:17.071Z Record version: sha256:73e013f8eea79d265ea4c1142afbf5f83e91c28c21fb7d27aeecb79092ef2d6e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to investors in [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."). Source downloaded (UTC): 2026-09-10T00:34:21.457Z to 2026-09-10T00:34:21.457Z Record version: sha256:10f7e7904ec8a54b15e0d25616ddf6943cfa12a7231b540e25cd1abb794c7320 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-944-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/470/944/#25-recognition) SEC content: no #### Surplus Notes ##### [470-944-25-1](https://asc.understandingaccounting.org/asc/470/944/#470-944-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:34:21.457Z to 2026-09-10T00:34:21.457Z Record version: sha256:c650e1a12f10b3fd092d93fdf4bd3646d40460b769cfe83da17e3d30806c6410 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [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.") shall be accounted for as debt instruments; equity treatment for surplus notes is inappropriate. Source downloaded (UTC): 2026-09-10T00:34:23.460Z to 2026-09-10T00:34:23.460Z Record version: sha256:243e3199e540f990c90e4bb4da7b37efc193343787b4d559f7000731573771ba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-944-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/470/944/#35-subsequent-measurement) SEC content: no #### Surplus Notes ##### [470-944-35-1](https://asc.understandingaccounting.org/asc/470/944/#470-944-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:34:23.460Z to 2026-09-10T00:34:23.460Z Record version: sha256:a9bf7542cbb855aaa44abfb33469e2cb3d3237fab792fa69a2d031631acf6b45 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Interest shall be accrued over the life of the surplus note, irrespective of the approval of interest and principal payments by the domiciliary state insurance commissioner, and shall be recognized as an expense in the same manner as other debt. Source downloaded (UTC): 2026-09-10T00:34:27.195Z to 2026-09-10T00:34:27.195Z Record version: sha256:39009f9a8f6617bfd4d277e9c1780bb6b27a83368845aa836469e82d1040f68f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-944-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/470/944/#45-other-presentation-matters) SEC content: no #### Surplus Notes ##### [470-944-45-1](https://asc.understandingaccounting.org/asc/470/944/#470-944-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:34:27.195Z to 2026-09-10T00:34:27.195Z Record version: sha256:d6e515bd04e3ebfc68f5a4fb8f64063cd9d01ede23ebc149ffe4febf1641f463 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [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.") shall be presented as liabilities in the financial statements of the issuer; equity treatment for surplus notes is inappropriate. Source downloaded (UTC): 2026-09-10T00:34:29.011Z to 2026-09-10T00:34:29.011Z Record version: sha256:a7e473981f4d6a332d1c8df6ee89e36543f0e6ccf5e07a2d6cbd60231d4e2485 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-944-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/470/944/#50-disclosure) SEC content: no #### Surplus Notes ##### [470-944-50-1](https://asc.understandingaccounting.org/asc/470/944/#470-944-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:34:29.011Z to 2026-09-10T00:34:29.011Z Record version: sha256:5828cb34a84c30066ca4705f91267031c95ca50933105322c8da8ed01bdd64da Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall disclose the domiciliary state insurance commissioner's role and ability to approve or disapprove any interest and principal payments.