{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/720/20/#30-initial-measurement","source":"FASB Accounting Standards Codification, Basic View","usage":"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.","topic":"720","topic_title":"Other Expenses","subtopic":"720-20","subtopic_title":"Insurance Costs","section":{"number":"30","label":"30 Initial Measurement","anchor":"30-initial-measurement","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"720-20-30-1","para":"30-1","html":"
See Subtopic 340-30 and Section 720-20-25 for measurement guidance on deposit accounting for payments to insurance entities that may not involve transfer of risk.
","snippet":"See Subtopic 340-30 and Section 720-20-25 for measurement guidance on deposit accounting for payments to insurance entities that may not involve transfer of risk.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f3a1c3d675830ba39b54bd0ddc13f4f7581ef1a7743e5bc5900db9c5e5942c65","downloaded_from":"2026-09-10T01:07:31.940Z","last_downloaded_at":"2026-09-10T01:07:31.940Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147483336","source_sha256":"98b6221ea00b679ed72e327eac0a8204fad70fbb45a7b42060da0d938dbc022a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8a46f6af28a3f128d2981acded2a10d3eed6df0dd18cef25c21518fe40b84307","downloaded_from":"2026-09-10T01:07:31.940Z","last_downloaded_at":"2026-09-10T01:07:31.940Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147483336","source_sha256":"98b6221ea00b679ed72e327eac0a8204fad70fbb45a7b42060da0d938dbc022a"}},{"block":"Claims-Made Contracts","heading":"Liability for Incurred but Not Reported Claims Based on the Cost of Tail Coverage","paragraphs":[{"citation":"720-20-30-2","para":"30-2","html":"
The estimated cost of purchasing tail coverage is not relevant in determining the loss to be accrued because paragraph 210-20-45-1 prohibits netting the insurance receivable against the claim liability. However, if the insured entity had the unilateral option to purchase tail coverage at a premium not to exceed a specified fixed maximum, then the insured entity could record a receivable for expected insurance recoveries (after considering deductibles and policy limits) for the portion of the incurred but not reported liability that is insurable under the tail coverage. In that case, the entity would need to record as a cost the expected premium for the tail coverage. The purchase of tail coverage does not eliminate the need to determine if an additional liability should be accrued because of policy limits or other factors.
","snippet":"The estimated cost of purchasing tail coverage is not relevant in determining the loss to be accrued because paragraph 210-20-45-1 prohibits netting the insurance receivable against the claim liability. However, if the i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:17bde3b8a1863500b666d37f46ac9f7a7403767f33ca86d4bdf1108a98b59daa","downloaded_from":"2026-09-10T01:07:31.940Z","last_downloaded_at":"2026-09-10T01:07:31.940Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147483336","source_sha256":"98b6221ea00b679ed72e327eac0a8204fad70fbb45a7b42060da0d938dbc022a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f5dee94cec176434535cf35262e290f0f603a3207ccb2f789d344a14abdbcf6c","downloaded_from":"2026-09-10T01:07:31.940Z","last_downloaded_at":"2026-09-10T01:07:31.940Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147483336","source_sha256":"98b6221ea00b679ed72e327eac0a8204fad70fbb45a7b42060da0d938dbc022a"}},{"block":"Multiple-Year Retrospectively Rated Contracts","heading":null,"paragraphs":[{"citation":"720-20-30-3","para":"30-3","html":"
For a multiple-year retrospectively rated insurance contract accounted for as insurance, the amount recognized in the current period shall be computed using a with-and-without method, as the difference between the insured's total contract costs before and after the experience under the contract as of the reporting date, including costs such as premium adjustments, settlement adjustments, and impairments of coverage. The amount of premium expense related to impairments of coverage shall be measured in relation to the original contract terms. Future experience under the contract (that is, future losses and future premiums that would be paid regardless of past experience) shall not be considered in measuring the amount to be recognized.
","snippet":"For a multiple-year retrospectively rated insurance contract accounted for as insurance, the amount recognized in the current period shall be computed using a with-and-without method, as the difference between the insure…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f891e9d557c1ddac5ff2a5261e4223a431cca2e80bfdda009e5690b76e61a3dd","downloaded_from":"2026-09-10T01:07:31.940Z","last_downloaded_at":"2026-09-10T01:07:31.940Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147483336","source_sha256":"98b6221ea00b679ed72e327eac0a8204fad70fbb45a7b42060da0d938dbc022a"}},{"citation":"720-20-30-4","para":"30-4","html":"
If the insured could terminate the contract before the end of its term and if termination would change the amounts paid (for example, if terminating the contract would cost less than continuing the contract in force), the liability resulting from the contract shall be measured as follows:
  1. a
    If a decision to terminate has been made, the measurement shall be based on an assumption of termination and on experience to date.
  2. b
    Otherwise, the measurement shall be based on the lesser of the following:
    1. 1
      The total incremental amount that would be paid based on the with-and-without calculation assuming experience to date and assuming termination (that is, excluding the effects of future losses and future premiums that would have been paid regardless of experience to date)
    2. 2
      The total incremental amount that would be paid based on the with-and-without calculation assuming experience to date and assuming no termination (that is, excluding the effects of future losses and future premiums that would have been paid regardless of experience to date).
","snippet":"If the insured could terminate the contract before the end of its term and if termination would change the amounts paid (for example, if terminating the contract would cost less than continuing the contract in force), th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:aec4f6c66eb8f70643fbedd8cbd03666860ef17257010359f6b4abb9c8b9fe80","downloaded_from":"2026-09-10T01:07:31.940Z","last_downloaded_at":"2026-09-10T01:07:31.940Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147483336","source_sha256":"98b6221ea00b679ed72e327eac0a8204fad70fbb45a7b42060da0d938dbc022a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c2a6b90df9859ea9cc4f0d3d2192aac8b578818693061ed3b26be609c016d64f","downloaded_from":"2026-09-10T01:07:31.940Z","last_downloaded_at":"2026-09-10T01:07:31.940Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147483336","source_sha256":"98b6221ea00b679ed72e327eac0a8204fad70fbb45a7b42060da0d938dbc022a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9863f1c53eca0254cf50d54fa7c2c04344b08d79b7daa2311be837b7261770b3","downloaded_from":"2026-09-10T01:07:31.940Z","last_downloaded_at":"2026-09-10T01:07:31.940Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147483336","source_sha256":"98b6221ea00b679ed72e327eac0a8204fad70fbb45a7b42060da0d938dbc022a"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9863f1c53eca0254cf50d54fa7c2c04344b08d79b7daa2311be837b7261770b3","downloaded_from":"2026-09-10T01:07:31.940Z","last_downloaded_at":"2026-09-10T01:07:31.940Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147483336","source_sha256":"98b6221ea00b679ed72e327eac0a8204fad70fbb45a7b42060da0d938dbc022a"}}