# ASC 805-944-25: Business Combinations — Financial Services—Insurance — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/805/944/#25-recognition) 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): 2026-09-10T01:26:51.439Z to 2026-09-10T01:26:51.439Z Record version: sha256:9766fdde0032a3e2c8cefaa0e6b4cc82b2bbb3ca4930d427bdc0971ba77172a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 805-944-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/805/944/#25-recognition) SEC content: no #### Insurance and Reinsurance Contracts Acquired ##### [805-944-25-1](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:51.439Z to 2026-09-10T01:26:51.439Z Record version: sha256:1cedc6734ec4f5ebc81e3d741f27e1ce7a3b30159b5e86286765797a36072a95 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The acquirer shall consider insurance and [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 acquired in a business combination to be new contracts for measurement and accounting purposes. ##### [805-944-25-2](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:51.439Z to 2026-09-10T01:26:51.439Z Record version: sha256:4094bb0ae019f8cd7bf6702af22b2f18e3ed55c370bd66f140b6f4d4988eaa0c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The acquirer shall carry forward the acquiree's classification of an acquired contract as an insurance or reinsurance contract or a deposit contract based on an understanding of the contractual terms of the acquired contract and any related contracts or agreements at the inception of the contract or, if the terms of those contracts or agreements were later modified in a manner that would change the classification, at the date of that modification (which may be the acquisition date). ##### [805-944-25-3](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:51.439Z to 2026-09-10T01:26:51.439Z Record version: sha256:de0b3e4a0d1a13e03e6a6531fb595124d74be6f3f8af8a75f5d8bb907f170ad8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The acquirer shall recognize the assets and liabilities arising from the rights and obligations of the insurance and reinsurance contracts acquired in the business combination. ##### [805-944-25-4](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:51.439Z to 2026-09-10T01:26:51.439Z Record version: sha256:75e2bc11809fcab8d92a272247ba1efe947418bf46304dcbc36f219057bbb08c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Other related contracts that are not insurance or reinsurance contracts shall be recognized at the date of acquisition in accordance with Topic 805. For instance, a contingent commission arrangement is a contingency that the acquirer shall account for in accordance with paragraphs [805-20-25-18A through 25-20B](https://asc.understandingaccounting.org/asc/805/20/#805-20-25-18A) and [805-20-30-9](https://asc.understandingaccounting.org/asc/805/20/#805-20-30-9). ##### [805-944-25-5](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:51.439Z to 2026-09-10T01:26:51.439Z Record version: sha256:59ee3ed2a548007166327634d42eb116a148dc739256689ffa0679355a46640d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An example of an indemnification agreement that may be in the form of a reinsurance contract is a guarantee by the seller of the adequacy of acquired claims and claims expense liabilities at the date of acquisition. The acquirer shall recognize any indemnification asset resulting from such an agreement in accordance with paragraphs [805-20-25-27 through 25-28](https://asc.understandingaccounting.org/asc/805/20/#805-20-25-27) and [805-20-30-18 through 30-19](https://asc.understandingaccounting.org/asc/805/20/#805-20-30-18) . ### Demutualizations #### Overall ##### [805-944-25-6](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:51.439Z to 2026-09-10T01:26:51.439Z Record version: sha256:1967ec449e10f0971d941ccd3f7aed6a126d2a1f332e695d151770bc84ecea92 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A [demutualization](https://asc.understandingaccounting.org/glossary/d/#demutualization "The conversion of a mutual insurance entity to a stock insurance entity.") or formation of a mutual insurance holding entity in and of itself does not constitute a change in ownership that requires a change in the historical accounting bases or carrying amounts of assets and liabilities. ##### [805-944-25-7](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:51.439Z to 2026-09-10T01:26:51.439Z Record version: sha256:b6fbaac328085942232cca146ed3949ffedc2784bb44424cabc4a1ee51db5c6e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The assets designated to the [closed block](https://asc.understandingaccounting.org/glossary/c/#closed-block "A mechanism to preserve, over time, the reasonable dividend expectations of individual policyholders with individual life, health, or annuity policies for which dividends are currently being paid or are expected to be paid under the current dividend scale. A closed block comprises a defined, limited group of policies and a defined set of assets, and is governed by a set of operating rules.") continue to be accounted for as they were before the [date of demutualization](https://asc.understandingaccounting.org/glossary/d/#date-of-demutualization "The date the plan of reorganization becomes effective."). #### Emergence of Earnings and Policyholder Dividend Obligation ##### [805-944-25-8](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:51.439Z to 2026-09-10T01:26:51.439Z Record version: sha256:91b94e024cd8a097bdb2b378c524e0b038cc32ba41faa707bdb7853eceb43bc2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The amounts to be included in net income relative to assets and liabilities included in a closed block shall be limited, based on a calculation prepared as of the date of demutualization or formation of a mutual insurance holding entity. As of the [actuarial calculation date](https://asc.understandingaccounting.org/glossary/a/#actuarial-calculation-date "The date as of which the actuarial calculation is performed, which is as of the date of demutualization or formation of a mutual insurance holding entity."), the [carrying amount](https://asc.understandingaccounting.org/glossary/c/#carrying-amount "The amount of an item as displayed in the financial statements.") of closed block liabilities will typically exceed the carrying amount of closed block assets. Certain of those assets, such as debt securities classified as available-for-sale under Subtopic 320-10, will be carried at [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.") with unrealized holding gains and losses included in other comprehensive income until realized. A demutualization or formation of a mutual insurance holding entity does not, in and of itself, constitute a change in ownership that results in the realization of those unrealized gains and losses. Instead, those unrealized gains and losses will be realized over the period the closed block policies remain [in force](https://asc.understandingaccounting.org/glossary/i/#in-force "Policies and contracts written and recorded on the books of an insurance carrier that are unexpired as of a given date."), as are all other transactions relating to the closed block assets and liabilities. ##### [805-944-25-9](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:51.439Z to 2026-09-10T01:26:51.439Z Record version: sha256:b152ddfcb333984d8d5a29142da944d2e99f715d4afeca29071f61a67d6fcf99 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As a result, the carrying amounts of the closed block assets shall be adjusted to remove those unrealized amounts to determine the maximum future earnings (before items that may not have been considered in the funding of the closed block, such as commissions and maintenance expenses; see paragraph [944-805-05-18](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-18)) that would be recognized in income over the period the policies in the closed block remain in force. ##### [805-944-25-10](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:51.439Z to 2026-09-10T01:26:51.439Z Record version: sha256:9d615f9b30917d394dd529392cbb7ac1b0221afaf4ae7b76f43ebb8e7d0852b7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The changes in the [net closed block liability](https://asc.understandingaccounting.org/glossary/n/#net-closed-block-liability "The carrying amount of closed block liabilities in excess of the carrying amount of closed block assets each adjusted to eliminate the effect of related amounts in accumulated other comprehensive income at the actuarial calculation date. Deferred acquisition costs are not assets of the closed block.") over time represent the expected closed block contribution to the earnings of the insurer that inure to the benefit of the stockholders. #### Dividends Payable to Stockholders ##### [805-944-25-11](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:51.439Z to 2026-09-10T01:26:51.439Z Record version: sha256:8397d726b67947abe1749ce976792614c83af74ec0500031fafa951c37967a1f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A dividend payable to stockholders, whether declared by a stock insurer or its holding entity, is a common corporate capital transaction. Cash dividends shall be recognized as a liability on the declaration date. #### Distributions to Members ##### [805-944-25-12](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:51.439Z to 2026-09-10T01:26:51.439Z Record version: sha256:df1f98ad84bfd6d37fbec5f737927f09c7c16d80236db94dcbb20d257af2e6cb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because the members of a mutual insurance holding entity are also policyholders of the stock insurance subsidiary, a distribution by a mutual insurance holding entity to its members shall be accounted for according to the substance of the transaction. Unless there are substantive independent third-party stockholders of the demutualized insurance entity or intermediate holding entity of the mutual insurance holding entity, the distribution shall be accounted for as a policyholder dividend in accordance with Subtopic 944-50. ##### [805-944-25-13](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:51.439Z to 2026-09-10T01:26:51.439Z Record version: sha256:c3b22cddd7006a3d5acdb55b0c12ff67f686d436c0f191f844c82ffa99305b5c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If there are substantive independent third-party stockholders and all of the following conditions also are satisfied, the distribution is presumed to be appropriately accounted for as an equity dividend: 1. a There is a mechanism to ensure that policyholder dividends are not a component of the mutual insurance holding entity distribution. 2. b All mutual insurance holding entity members are eligible to receive the mutual insurance holding entity distribution and the allocation of the mutual insurance holding entity distribution is consistent with the concept of mutual insurance holding entity membership. Depending on the jurisdiction, the distribution may be based on equity share or equally distributed to each mutual insurance holding entity member. 3. c The distribution is legally characterized as a membership distribution rather than a policyholder distribution. ##### [805-944-25-14](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:51.439Z to 2026-09-10T01:26:51.439Z Record version: sha256:a55b19945d56c94ae44f185299f9584db43edae93057b5e6a5ea886a631a43f4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a distribution by the mutual insurance holding entity is determined to be a policyholder dividend expense, the insurance subsidiary shall recognize the policyholder dividend in its separate financial statements as an expense with recognition of a corresponding capital contribution from the mutual insurance holding entity. ##### [805-944-25-15](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-15) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:51.439Z to 2026-09-10T01:26:51.439Z Record version: sha256:9fbee38a1713533adfc0f100ba0277f2333e7696f4e45db3785d615d47ea8b28 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The mutual insurance holding entity shall reflect the amount of the distribution as a capital contribution to the insurance subsidiary in its separate financial statements. In consolidated financial statements, the expense shall be reported and the capital contribution shall be eliminated.