# ASC 740-944-25: Income Taxes — Financial Services—Insurance — 25 Recognition

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/740/944/#25-recognition)

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## ASC 740-944-25: 25 Recognition

[Read section](https://asc.understandingaccounting.org/asc/740/944/#25-recognition)

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#### Policyholder Dividends

##### [740-944-25-1](https://asc.understandingaccounting.org/asc/740/944/#740-944-25-1)

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Although payment is not required, a dividend recognized under paragraph [944-50-25-3](https://asc.understandingaccounting.org/asc/944/50/#944-50-25-3) is considered a planned contractual benefit in computing liabilities under generally accepted accounting principles (GAAP). However, it may be necessary to identify the amount of this dividend to calculate deferred income taxes in those cases in which there is a question as to whether the dividend provision in the liabilities, together with the dividends paid or declared, may exceed the amount of dividends otherwise deductible for federal income tax purposes.

#### Policyholders' Surplus

##### [740-944-25-2](https://asc.understandingaccounting.org/asc/740/944/#740-944-25-2)

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Except as noted in the following paragraph, a deferred tax liability or asset shall be recognized for the deferred tax consequences of temporary differences in accordance with Topic 740.

##### [740-944-25-3](https://asc.understandingaccounting.org/asc/740/944/#740-944-25-3)

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As described in Topic 740, a [life insurance entity](https://asc.understandingaccounting.org/glossary/l/#life-insurance-entity "An entity that can issue annuity, endowment, and accident and health insurance contracts as well as life insurance contracts. Life insurance entities may be either stock or mutual entities.") shall not provide deferred taxes on taxable temporary differences related to policyholders' surplus that arose in fiscal years beginning on or before December 15, 1992. However, if circumstances indicate that the insurance entity is likely to pay income taxes, either currently or in later years, because of a known or expected reduction in policyholders' surplus, income taxes attributable to that reduction shall be accrued as a tax expense of the current period.