# ASC 805-944-35: Business Combinations — Financial Services—Insurance — 35 Subsequent Measurement Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/805/944/#35-subsequent-measurement) 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): 2026-09-10T01:26:56.608Z to 2026-09-10T01:26:56.608Z Record version: sha256:f2d1fd53795cf6b026cbc83c2a6cedeec5608d211f73b7a7de1acacd5e8c722a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 805-944-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/805/944/#35-subsequent-measurement) SEC content: no #### Insurance and Reinsurance Contracts Acquired ##### [805-944-35-1](https://asc.understandingaccounting.org/asc/805/944/#805-944-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:56.608Z to 2026-09-10T01:26:56.608Z Record version: sha256:6c1592b0fce4b40a50a89c03aeb64d9f677a0dfbe063c59f04aa49ded51b77a0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After the business combination, the acquirer shall measure the intangible asset (or other liability) on a basis consistent with the related insurance or [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.") liability. ##### [805-944-35-2](https://asc.understandingaccounting.org/asc/805/944/#805-944-35-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:56.608Z to 2026-09-10T01:26:56.608Z Record version: sha256:1ce9cc477173fe188e1318d6a5d78f10145faa94b7da88635e2398faed0b639d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For example, for most short-duration contracts such as many property and liability insurance contracts, [claim](https://asc.understandingaccounting.org/glossary/c/#claim "A demand for payment of a policy benefit because of the occurrence of an insured event.") liabilities are not discounted under generally accepted accounting principles (GAAP), so amortizing the intangible asset like a discount using an [interest method](https://asc.understandingaccounting.org/glossary/i/#interest-method "The method used to arrive at a periodic interest cost (including amortization) that will represent a level effective rate on the sum of the face amount of the debt and (plus or minus) the unamortized premium or discount and expense at the beginning of each period.") could be an appropriate method. ##### [805-944-35-3](https://asc.understandingaccounting.org/asc/805/944/#805-944-35-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:56.608Z to 2026-09-10T01:26:56.608Z Record version: sha256:889ec66a42198c325a0a57937183020dcf0bda102b079a4b06ada04dcc461ab2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For certain long-duration contracts such as traditional life insurance contracts, using a basis consistent with the measurement of the liability would be similar to the guidance provided in paragraph [944-30-35-3](https://asc.understandingaccounting.org/asc/944/30/#944-30-35-3), which requires that deferred [acquisition costs](https://asc.understandingaccounting.org/glossary/a/#acquisition-costs "Costs that are related directly to the successful acquisition of new or renewal insurance contracts.") be amortized using methods that include assumptions consistent with those used in estimating the [liability for future policy benefits](https://asc.understandingaccounting.org/glossary/l/#liability-for-future-policy-benefits "An accrued obligation to policyholders that relates to insured events, such as death or disability.")including subsequent revisions to those assumptions. Also, paragraph [944-30-35-63](https://asc.understandingaccounting.org/asc/944/30/#944-30-35-63) specifies that the present value of future profits is subject to premium deficiency testing in accordance with the provisions of Subtopic 944-60. ### Demutualizations #### Policyholder Liabilities ##### [805-944-35-4](https://asc.understandingaccounting.org/asc/805/944/#805-944-35-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:56.608Z to 2026-09-10T01:26:56.608Z Record version: sha256:7d735a8175c29a1c9f823c7ada6ca8be90915929bdc24ad9dd25eda1e1aa557e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The policyholder liabilities for [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.") participating life insurance contracts shall continue to be calculated under the provisions of Subtopic 944-20 as well as the Demutualizations Subsections of this Subtopic. #### Emergence of Earnings and Policyholder Dividend Obligation ##### [805-944-35-5](https://asc.understandingaccounting.org/asc/805/944/#805-944-35-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:56.608Z to 2026-09-10T01:26:56.608Z Record version: sha256:3e6b9ba4548cb2e6f759bb11cb9517e4e7119c68cd501c0bb0ff45beaf79c032 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [944-805-25-10](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-10) states that 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. Cumulative actual closed block earnings in excess of the cumulative expected periodic amounts reflected in the [actuarial calculation](https://asc.understandingaccounting.org/glossary/a/#actuarial-calculation "The periodic expected changes in the net closed block liability (on the basis of generally accepted accounting principles [GAAP]), which is after the elimination of the effect of applicable items of other comprehensive income. The amortization of deferred acquisition costs is not a component of the actuarial calculation because deferred acquisition costs are not a closed block asset.") (see paragraph [944-805-30-3](https://asc.understandingaccounting.org/asc/805/944/#805-944-30-3)) do not inure to the stockholders and shall be recorded as an additional liability to closed block policyholders (referred to as a policyholder dividend obligation). Those amounts will result in additional future dividends to closed block policyholders unless otherwise offset by less-favorable-than-expected future performance of the closed block. ##### [805-944-35-6](https://asc.understandingaccounting.org/asc/805/944/#805-944-35-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:56.608Z to 2026-09-10T01:26:56.608Z Record version: sha256:53f3157be29dfb432dfc8a524bd3f335add478c0bfa5303a3e3b1ca92b4f68cd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [944-805-30-4](https://asc.understandingaccounting.org/asc/805/944/#805-944-30-4) states that the actuarial calculation required in paragraph [944-805-30-3](https://asc.understandingaccounting.org/asc/805/944/#805-944-30-3) shall continue to be used in subsequent accounting periods to determine the change in the policyholder dividend obligation. That paragraph states that the actuarial calculation shall not be revised in future accounting periods. ##### [805-944-35-7](https://asc.understandingaccounting.org/asc/805/944/#805-944-35-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:56.608Z to 2026-09-10T01:26:56.608Z Record version: sha256:4e604ece9a88756a1a21e96db170367a0abe8a787c1fe1c4d0ac49823dba763e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The amount of the policyholder dividend obligation shall be determined by comparing cumulative actual earnings of the closed block from 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.") to the date of measurement with the amount of cumulative expected earnings based on the actuarial calculation for the same period. ##### [805-944-35-8](https://asc.understandingaccounting.org/asc/805/944/#805-944-35-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:56.608Z to 2026-09-10T01:26:56.608Z Record version: sha256:f337420da560a8b9389cb5fefbf28fae02aa00f31ce67d669d1bbbfc19b23858 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cumulative actual earnings in excess of cumulative expected earnings based on the actuarial calculation shall be recorded as a policyholder dividend obligation. ##### [805-944-35-9](https://asc.understandingaccounting.org/asc/805/944/#805-944-35-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:56.608Z to 2026-09-10T01:26:56.608Z Record version: sha256:3f7181275c2746d0ed9ebb45a2e18219d3bbe41e2e21bb18a178a4b9dc9d1dc8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Unrealized investment gains and losses and other amounts related to the closed block normally reported in accumulated other comprehensive income that have arisen after the actuarial calculation date shall be included in the determination of the amount of the policyholder dividend obligation limited, in the case of losses, to the extent that the policyholder dividend obligation is otherwise positive. ##### [805-944-35-10](https://asc.understandingaccounting.org/asc/805/944/#805-944-35-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:56.608Z to 2026-09-10T01:26:56.608Z Record version: sha256:c03acb374bf0343e9deb0109cd7618f64582beeaf08820a7c44220d75e6dd2b8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Unrealized investment gains and losses and other items related to the closed block normally reported in accumulated other comprehensive income that have arisen at or after the actuarial calculation date shall continue to be reported in accumulated other comprehensive income. ##### [805-944-35-11](https://asc.understandingaccounting.org/asc/805/944/#805-944-35-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:56.608Z to 2026-09-10T01:26:56.608Z Record version: sha256:26e4a8197793631bc362a71d2a3f4e90d0eaad89471db815a1291d46132a40ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Amounts related to the closed block that have arisen after the actuarial calculation date shall enter into the determination of the policyholder dividend obligation with an offsetting amount reported in accumulated other comprehensive income. The amount charged to policyholder dividend obligation for losses shall be limited to the extent that the policyholder dividend obligation is otherwise positive. Those amounts shall be reported in the income statement and the amounts previously reported in other comprehensive income shall be reversed when investment gains and losses and other items of other comprehensive income are realized. ##### [805-944-35-12](https://asc.understandingaccounting.org/asc/805/944/#805-944-35-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:56.608Z to 2026-09-10T01:26:56.608Z Record version: sha256:61fb908ed023602619512e55ac13fb63a1a3564e0af9877cb0d81daee5d2905e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Unrealized investment losses and other loss items related to the closed block that would result in a negative policyholder dividend obligation shall be recognized in other comprehensive income applicable to stockholders—the policyholder dividend obligation account may not have a negative balance. ##### [805-944-35-13](https://asc.understandingaccounting.org/asc/805/944/#805-944-35-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:56.608Z to 2026-09-10T01:26:56.608Z Record version: sha256:c095507750f90fe1739f396921e453e90c8e375c9429d7092490e6a21a241bc1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The policyholder dividend obligation will decrease if experience is less favorable than expected and the dividend scale is not commensurately reduced. ##### [805-944-35-14](https://asc.understandingaccounting.org/asc/805/944/#805-944-35-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:56.608Z to 2026-09-10T01:26:56.608Z Record version: sha256:f64d62610e0febe1e79f600c84264530df4b117f6fe722ffd5d2bea223fc7058 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If dividends paid are higher than originally expected in the dividend scale, the policyholder dividend obligation will decrease. #### Other Considerations ##### [805-944-35-15](https://asc.understandingaccounting.org/asc/805/944/#805-944-35-15) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:56.608Z to 2026-09-10T01:26:56.608Z Record version: sha256:03431c2a668f60a2be000dbc3d7263f82bfbdcc974bac19c6b21ba67a2575524 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The accounting guidance in Subtopic 944-20 shall be applied to demutualized insurance entity participating life insurance contracts within its scope that are issued after the [date of demutualization](https://asc.understandingaccounting.org/glossary/d/#date-of-demutualization "The date the plan of reorganization becomes effective.") or formation of a mutual insurance holding entity. The segregation of undistributed accumulated earnings on participating life insurance contracts in excess of amounts that inure to stockholders is meaningful in a stock life insurance entity because the objective of such presentation is to identify amounts that are not distributable to stockholders. Therefore, the guidance in paragraphs [944-50-25-1 through 25-2](https://asc.understandingaccounting.org/asc/944/50/#944-50-25-1) and [944-50-30-1 through 30-2](https://asc.understandingaccounting.org/asc/944/50/#944-50-30-1) relating to dividends on participating life insurance contracts applies to contracts that are sold after the date of demutualization or formation of a mutual insurance holding entity within the scope of Subtopic 944-20. The guidance in those paragraphs shall also be applied by stock insurance entities with respect to participating life insurance contracts for which limitations exist on the amount of net income that may be distributed to stockholders. If there is a limitation on the amount of income from participating life insurance contracts issued after the date of demutualization or formation of a mutual insurance holding entity that may be distributed to stockholders, the policyholders' share of income on those contracts that may not be distributed to stockholders shall be charged to operations with a corresponding credit to a liability. Dividends paid to participating policyholders reduce that liability.