# ASC 805-944: Business Combinations — Financial Services—Insurance Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/805/944/) 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): 2026-09-10T01:26:39.788Z to 2026-09-10T01:27:09.747Z Record version: sha256:c32c113315b4edca86304199bd0baf24afd1f2ab529c3023bd537e5233f05803 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 805-944: Business Combinations — Financial Services—Insurance ### Machine-generated study aids ```json { "summary": "ASC 805-944 tells insurance entities how to account for insurance and reinsurance contracts acquired in a business combination and how to account for demutualizations (or formation of a mutual insurance holding entity). Acquired insurance/reinsurance contracts are treated as new contracts, recognized at fair value but split into (a) amounts measured under the acquirer's own insurance accounting policies and (b) an intangible asset (or liability) for the residual, while the acquiree's classification as insurance versus deposit contract is carried forward. A demutualization is not itself a change in ownership requiring a new accounting basis; instead the entity computes a one-time actuarial calculation of maximum future closed-block earnings and records a policyholder dividend obligation whenever cumulative actual closed-block earnings exceed cumulative expected earnings.", "key_points": [ "Insurance and reinsurance contracts acquired in a business combination are considered new contracts for measurement and accounting purposes, but the acquiree's classification as an insurance/reinsurance contract versus a deposit contract is carried forward based on terms at contract inception or last substantive modification (944-805-25-1 through 25-2).", "Fair value of the acquired contractual rights and obligations is recognized in two components: assets and liabilities measured under the acquirer's own insurance accounting policies (excluding the acquiree's deferred acquisition costs and unearned premiums), and an intangible asset or other liability for the difference (944-805-30-1); that intangible is subsequently measured on a basis consistent with the related insurance liability (944-805-35-1 through 35-3).", "A demutualization or formation of a mutual insurance holding entity does not, by itself, constitute a change in ownership requiring a change in historical accounting bases or carrying amounts, and closed block assets continue to be accounted for as before (944-805-25-6 through 25-7).", "Maximum future stockholder earnings from the closed block equal the excess of closed block liabilities over closed block assets, adjusted to remove unrealized amounts in accumulated other comprehensive income, measured at the demutualization date (944-805-25-8 through 25-9).", "A best-estimate actuarial calculation (no provision for adverse deviation) made at the actuarial calculation date is used in all later periods and shall not be revised (944-805-30-3 through 30-4); cumulative actual closed block earnings exceeding cumulative expected earnings are recorded as a policyholder dividend obligation, which may never be negative (944-805-35-5 through 35-12).", "Distributions by a mutual insurance holding entity to its members are accounted for by substance—as policyholder dividends under Subtopic 944-50 unless there are substantive independent third-party stockholders and the three conditions in 944-805-25-13 are met.", "In a distribution-form demutualization all retained earnings are reclassified to capital stock and additional paid-in capital (with cash or policy credits charged directly to those capital accounts), while a subscription-form demutualization causes no such reclassification; direct and incremental demutualization costs are shown as a single line item within income from continuing operations (944-805-45-3 through 45-4)." ], "categories": [ "Business combinations", "Industry-specific", "Subsequent measurement", "Disclosure" ], "audience_level": "advanced", "student_note": "This is niche insurance-industry guidance, but it illustrates two exam-worthy ideas: acquired insurance contracts are remeasured at fair value yet split into a policy-basis component plus a residual intangible, and a demutualization is a reorganization—not a purchase—so no new basis arises. The most common misunderstanding is thinking the closed block is a separate legal or reporting entity; it is displayed line-by-line with the insurer's other assets and liabilities, and its assets remain subject to the insurer's general creditors.", "related_topics": [ "944-20", "944-30", "944-50", "944-60", "805-20", "350-30" ], "key_concepts": [ "acquired insurance and reinsurance contracts", "demutualization", "mutual insurance holding entity", "closed block", "policyholder dividend obligation", "actuarial calculation date", "maximum future earnings inuring to stockholders", "participating life insurance contracts" ] } ``` Source downloaded (UTC): 2026-09-10T01:26:39.788Z to 2026-09-10T01:26:39.788Z Record version: sha256:2f115e357422fad966b041cc174982b61a393f7f822cd05eb8a1256a1720a9c5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 805-944-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/805/944/#00-status) SEC content: no ##### [805-944-00-1](https://asc.understandingaccounting.org/asc/805/944/#805-944-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:39.788Z to 2026-09-10T01:26:39.788Z Record version: sha256:76dd12bab745ee6201222c475c86d15ac243008adb294d91ebc3ac398e823e9e 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
Acquisition CostsAmendedAccounting Standards Update No. 2010-2610/13/2010
Involuntary TerminationSupersededAccounting Standards Update No. 2014-0603/14/2014
Participating InsuranceAddedAccounting Standards Update No. 2016-1912/14/2016
Participating Insurance ContractsSupersededAccounting Standards Update No. 2016-1912/14/2016
Reinsurance RecoverableAddedAccounting Standards Update No. 2016-1912/14/2016
TerminationAmendedAccounting Standards Update No. 2014-0603/14/2014
Voluntary TerminationSupersededAccounting Standards Update No. 2014-0603/14/2014
944-805-05-10AmendedAccounting Standards Update No. 2016-1912/14/2016
944-805-30-1AmendedAccounting Standards Update No. 2016-1912/14/2016
944-805-35-3AmendedAccounting Standards Update No. 2018-1208/15/2018
944-805-45-3AmendedAccounting Standards Update No. 2015-0101/09/2015
944-805-50-3AmendedAccounting Standards Update No. 2018-1208/15/2018
944-805-55-3AmendedAccounting Standards Update No. 2018-1208/15/2018
944-805-55-6 through 55-11
AmendedAccounting Standards Update No. 2018-1208/15/2018
944-805-55-9AmendedMaintenance Update 2016-11 (PDF)06/27/2016
944-805-55-12SupersededAccounting Standards Update No. 2018-1208/15/2018
944-805-55-13SupersededAccounting Standards Update No. 2018-1208/15/2018
Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:7ea40fd3740af08ccb98dcaca3197c3757a97c632fdecd67425d01253700d11e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 805-944-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/805/944/#05-overview-and-background) SEC content: no ##### [805-944-05-1](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:f77b8e6ab5d67f831a5d0d9b54241afc4127194d1570cf7ffe3ddd841a790899 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance to insurance entities on accounting for and financial reporting of business combinations. The guidance in this Subtopic is presented in the following two Subsections: 1. a General 2. b Demutualizations. ##### [805-944-05-2](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:fb52a303bfc30db6302310d98ba9ec34560421fad9f5f38fc10796be9a893738 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The General Subsections of this Subtopic provide guidance to insurance entities on accounting for and financial reporting of 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. ### Demutualizations ##### [805-944-05-3](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:6bfc6051dc7313c64cf544f99e5dab2108f92fcd2cf30482bf3491365a6dde87 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Demutualizations Subsections of this Subtopic provide guidance to insurance entities on accounting for and financial reporting of [demutualizations](https://asc.understandingaccounting.org/glossary/d/#demutualization "The conversion of a mutual insurance entity to a stock insurance entity."). ##### [805-944-05-4](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:19c337f85f94e70e7a5f47262a7e14aeaeb0bf3855ee5e211ab95853b3e30ce3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subsection is organized as follows: 1. a The demutualization process 2. b Formation of a mutual insurance holding entity 3. c Closed blocks for certain participating life insurance contracts 4. d Alternative mechanisms to closed blocks. #### The Demutualization Process ##### [805-944-05-5](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:0e5f3723efdaf65b551de5c4054b820f0a619a99680fd4c939d97d1321ea4ebb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Mutual insurance entities differ from stock insurance entities in that they do not have stockholders. A mutual insurance entity is considered to be owned by policyholders whose insurance contracts embody their rights as insureds and as members of the mutual insurance entity. ##### [805-944-05-6](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:e950dd7ed4967a47547e900c157162299d9182314c06b2929a64bde24b0fd62f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The process of demutualization or formation of a mutual insurance holding entity is subject to scrutiny and approval by state insurance regulatory authorities. Most states have some form of demutualization statute. A range of demutualization statutes and regulations exist for insurance entities. Typically, those laws contemplate a direct and full reorganization of the mutual insurer to a stock form. In accordance with some demutualization statutes, eligible policyholders receive stock, [policy credits](https://asc.understandingaccounting.org/glossary/p/#policy-credits "Additional values applied to a policy through dividends, increases in fund values, accumulation values or accumulation account values or extensions of coverages."), policyholder benefits, cash, or subscription rights as consideration for their membership interest. ##### [805-944-05-7](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:b4e5d52141fef3818e3d222702469d09080aa577e488ab49d6816e8825ef7d24 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The process for allocating the aggregate consideration among eligible policyholders varies based on individual entity circumstances and applicable regulatory statutes. The allocation process generally consists of a fixed and a variable component. ##### [805-944-05-8](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:c36353abc0fc598f97bb04c794772156906515a28b63c45b6f5fd96e6a1ce74e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The fixed component represents consideration for eligible policyholders' membership interest in the mutual insurer and consists of a given number of shares per policyholder (or sometimes, per policy). ##### [805-944-05-9](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:ff8ba80fc898943fe9d203faed8e98303290ee3c832c68670fb1f01bba73533a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The variable component represents consideration for eligible policyholders' contribution to the value of the insurer. The variable component of the aggregate compensation is allocated to policyholders in proportion to the actuarial contributions of their eligible policies, if positive. A policy's actuarial contribution consists of its historical equity share (the policy's past contribution to entity equity) and, in most cases, the prospective equity share; that is, the present value of the policy's expected future contributions to entity equity. #### Formation of a Mutual Insurance Holding Entity ##### [805-944-05-10](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:e88641bbcc9a48c9fc2179de696b687d057e62f081fc032e44d18e45e96539af Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An alternative to demutualization, in the jurisdictions where it is permitted, is for a mutual insurance entity to form a mutual insurance holding entity. The mutual insurer is converted to a stock insurance entity and becomes a stockholder-owned entity that operates as a subsidiary of the newly formed mutual insurance holding entity. All the initial stock of the reorganized entity is issued to the mutual insurance holding entity. Governance of the mutual insurance holding entity is established by the former mutual insurance entity's board of directors. The converted stock insurer may generate additional capital through an initial or subsequent public offering; however, most statutes specify that the mutual insurance holding entity must own greater than 50 percent of the voting rights of the converted insurer to ensure that the mutual insurance holding entity maintains effective control. The policyholders of the converted insurer become members of the mutual insurance holding entity through the transfer of their mutual membership interests to the mutual insurance holding entity, retaining the same voting rights they had previously. Policyholders with [participating insurance](https://asc.understandingaccounting.org/glossary/p/#participating-insurance "Insurance in which the policyholder is entitled to participate in the earnings or surplus of the insurance entity. The participation occurs through the distribution of dividends to policyholders.") contracts retain their participating contract in the converted stock insurer, but unlike in a demutualization, there is no distribution of equity or subscription rights to policyholders. ##### [805-944-05-11](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:aa506335d84b21e2352b0e9a38678542bcffa071f54d91d8ac8d65242454b52c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Most of the past demutualizations and at least one of the past mutual insurance holding entity conversions have been accompanied or followed by an initial public offering of the stock of a demutualized insurance entity or an intermediate holding entity of the mutual insurance holding entity. #### Closed Blocks for Certain Participating Life Insurance Contracts ##### [805-944-05-12](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:68422b68ee0fe9961b9e48f464c19c9d518831a839229d6c8634a9291a89fc6f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In connection with a demutualization or the formation of a mutual insurance holding entity, some state insurance departments require that a [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.") or alternative mechanism be established for certain participating life insurance contracts to protect the adjustable policy features and dividend expectations of participating life insurance policyholders from the competing interests of stockholders. Typically, the [plan of demutualization](https://asc.understandingaccounting.org/glossary/p/#plan-of-demutualization "The plan of reorganization, including all exhibits and schedules thereto, as it may be amended from time to time, that is adopted by the board of directors of the demutualizing entity, pursuant to which the entity demutualizes.") describes how the closed block will operate. ##### [805-944-05-13](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:8884f7a5e61456660f910bec50b3cf2f4e4e9b03649fb9ecdab9ec8f8298b37d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The closed block assets and cash flows provided by those assets (see paragraph [944-805-05-15](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-15)) will not inure to the stockholders of the demutualized entity; instead, all cash flows from those assets will be used to benefit the closed block policyholders (absent regulatory approval to the contrary or insolvency of the insurer). Because the insurance entity remains obligated to provide for minimum guarantees under the participating policy, it is consequently possible under certain circumstances that funds from outside the closed block will have to be used to meet the contractual benefits of the closed block policyholders. The assets designated to the closed block are subject to the same liabilities, with the same priority in the case of insolvency or in liquidation, as assets outside the closed block. In many situations, commissions and other expenses (including management expenses) of operating and administering the closed block will not be charged to the closed block. Unless the state insurance department consents to an earlier [termination](https://asc.understandingaccounting.org/glossary/t/#termination "In general, the failure to renew an insurance contract. Involuntary terminations include death, expirations, and maturities of contracts. Voluntary terminations of life insurance contracts include lapses with or without cash surrender value and contract modifications that reduce paid-up whole-life benefits or term-life benefits."), the closed block will continue in effect until the date on which none of the policies in the closed block remains [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."). ##### [805-944-05-14](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:6576eddb169dd2b601d867d322e6e7d9ba4375e8c4ef7be66410c41fa8ffc179 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The process of formation of the closed block is negotiated between the insurance entity and the applicable state insurance regulators. Estimated future cash flows are considered in determining the nature and amount of assets designated to the closed block. The assets that are designated to the closed block are expected to produce cash flows sufficient to satisfy the obligations of the closed block, as well as the continuation of policyholder [dividend scales](https://asc.understandingaccounting.org/glossary/d/#dividend-scales "The actuarial formulas used by life insurance entities to determine amounts payable as dividends on participating policies based on experience factors relating, among other things, to investment results, mortality, lapse rates, expenses, premium taxes, and policy loan interest.") and policy credits before the demutualization, if the underlying experience continues. Actual policy dividends paid may be increased or decreased based on the effect of future events, such as investment experience, [mortality](https://asc.understandingaccounting.org/glossary/m/#mortality "The relative incidence of death in a given time or place.") gains or losses, and [persistency](https://asc.understandingaccounting.org/glossary/p/#persistency "The complement of the termination rate, persistency is the renewal quality of insurance contracts, that is, the number of insureds that keep their insurance in force during a period. Persistency varies by plan of insurance, age at issue, year of issue, frequency of premium payment, and other factors.") of the closed block policies. ##### [805-944-05-15](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-15) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:5b14a3d2105fb8d576c38ec4aaa841e2b9f863f83a24c2d012a76c3ab04e46e2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The specific policyholder contracts designated for inclusion in the closed block are part of the negotiation process with the insurance regulators. ##### [805-944-05-16](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-16) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:8e65653e08fe4bb04b547225076db25af18424ab2fd61c2937045470d609b3f9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If cash flows from the closed block assets and experience of the closed block are, in the aggregate, more or less favorable than assumed in the funding of the closed block, total dividends paid to closed block policyholders could differ from the original dividend assumptions. Net favorable deviations in closed block performance, unless reversed by subsequent unfavorable experience, will be available for distribution over time only to closed block policyholders and will not be available to the insurance entity or its stockholders. Net unfavorable deviations could result in reduced dividends to closed block policyholders, unless reversed by future favorable experience or ultimately funded from assets outside of the closed block. ##### [805-944-05-17](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-17) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:3f7cce2c47c285d1cd1ba5accd5471d2866a2c16d424fcbf6adceda8f746cf08 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Regardless of the closed block's performance, the insurance entity is obligated to pay guaranteed benefits under the policies in accordance with their terms. If the cash flows from the assets allocated to the closed block and the policies included in the closed block prove to be insufficient to pay the benefits guaranteed under the policies included in the closed block, the insurance entity will be required to make those payments from assets outside of the closed block. #### Alternative Mechanisms to Closed Blocks ##### [805-944-05-18](https://asc.understandingaccounting.org/asc/805/944/#805-944-05-18) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:43.337Z to 2026-09-10T01:26:43.337Z Record version: sha256:8ff07d2b3ecd98312bce103cc6558425eef14c526440b920a0828c7809fae6e0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Alternatives to the closed block have arisen in practice encompassing, for a number of types of contracts, various mechanisms believed by the insurance entities and state insurance regulators to be appropriate in the specific circumstances. Closed block alternative mechanisms have been used in lieu of closed blocks for certain participating life insurance contracts to commit to the insurance regulator that the insurance entity will continue to follow its established dividend practices. Closed block alternative mechanisms also have been used to protect nonguaranteed elements of participating and [nonparticipating insurance contracts](https://asc.understandingaccounting.org/glossary/n/#nonparticipating-insurance-contract "Insurance contracts that are not entitled to dividends. Usually issued by a stock life insurance entity at premium rates that are usually lower than those charged if dividends are payable. Mutual entities may issue nonparticipating contracts.") such as interest credits on deferred annuities and adjustable premiums on adjustable premium term business. In some instances, the methodology and limitations defined in the agreements with the state insurance regulators have considered only specific profit components, such as mortality experience on a block of term insurance or investment spreads on a block of annuities, and in other instances have considered virtually all components of product profitability. If there is a limitation on the profits that may inure to the stockholders, there is an agreement between the insurance entity and the insurance regulators that defines all of the following: 1. a The contracts covered by the limitation 2. b The profit limitation calculation 3. c The timing and manner (for example, as policy dividends, reduced premiums, or additional benefits) in which amounts that may not be distributed to stockholders are to be distributed to policyholders. Source downloaded (UTC): 2026-09-10T01:26:46.496Z to 2026-09-10T01:26:46.496Z Record version: sha256:870b820fa7fc09997b350bd7b9987db30cb9aea7e3ef5431306d0af835fbf820 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 805-944-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/805/944/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [805-944-15-1](https://asc.understandingaccounting.org/asc/805/944/#805-944-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:46.496Z to 2026-09-10T01:26:46.496Z Record version: sha256:42b7760981dcc5e052a2386a36048649cc008ef3850d2d3b71c2175340ceedfc 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. ### Demutualizations ##### [805-944-15-2](https://asc.understandingaccounting.org/asc/805/944/#805-944-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:46.496Z to 2026-09-10T01:26:46.496Z Record version: sha256:1f628854c54e81fe6b963cde616d78c888076b774717b34c30f6afd2c559b1b8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Demutualizations Subsections of this Subtopic follow the same Scope and Scope Exceptions as outlined in the [General Subsection](https://asc.understandingaccounting.org/asc/805/944/#15-scope-and-scope-exceptions) of this Section, with specific transaction exceptions and qualifications and other considerations noted below. #### Transactions ##### [805-944-15-3](https://asc.understandingaccounting.org/asc/805/944/#805-944-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:46.496Z to 2026-09-10T01:26:46.496Z Record version: sha256:cfaf8b17f81b64a14216580ac596bfad3793982a9a0f27c79adf32190c79317f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Demutualizations Subsections of this Subtopic applies to all formal closed blocks and to [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.") alternative mechanisms to the extent the concepts are applicable to them, all of which are referred to as closed blocks in the Demutualizations Subsections of this Subtopic. #### Other Considerations ##### [805-944-15-4](https://asc.understandingaccounting.org/asc/805/944/#805-944-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:46.496Z to 2026-09-10T01:26:46.496Z Record version: sha256:5809c43c183e322e87efe31909fe1b05843e3f516953bbd6aac03245c61ae789 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Demutualizations Subsections of this Subtopic does not address what constitutes a change in ownership or reporting entity that would require a change in basis for the reported assets and liabilities. ##### [805-944-15-5](https://asc.understandingaccounting.org/asc/805/944/#805-944-15-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:46.496Z to 2026-09-10T01:26:46.496Z Record version: sha256:a559cee70d7f3ebabe7c2116635328e04b5d8eb7aa95d5870458f08a5f1123f2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The accounting guidance in Subtopic 944-20 is the appropriate accounting method for participating life insurance contracts that meet the conditions of paragraph [944-20-15-3](https://asc.understandingaccounting.org/asc/944/20/#944-20-15-3) and, therefore, an insurance entity shall continue to apply that guidance to demutualized insurance entities' participating life insurance contracts issued before 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. However, the segregation of undistributed accumulated earnings on participating contracts is meaningful in a stock [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.") because the objective of such presentation is to identify amounts that are not distributable to stockholders. Therefore, after the date of demutualization or formation of a mutual insurance holding entity, the provisions of paragraphs [944-50-25-2](https://asc.understandingaccounting.org/asc/944/50/#944-50-25-2) and [944-50-30-2](https://asc.understandingaccounting.org/asc/944/50/#944-50-30-2) relating to dividends on participating life insurance contracts shall apply to those contracts sold before the date of demutualization or formation of a mutual insurance holding entity. 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. Source downloaded (UTC): 2026-09-10T01:26:53.577Z to 2026-09-10T01:26:53.577Z Record version: sha256:e4192c61988aa1c6e320a1c8ae9710f18e7315211f35a44481ecaf819b147c62 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 805-944-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/805/944/#30-initial-measurement) SEC content: no #### Insurance and Reinsurance Contracts Acquired ##### [805-944-30-1](https://asc.understandingaccounting.org/asc/805/944/#805-944-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:53.577Z to 2026-09-10T01:26:53.577Z Record version: sha256:daa0c4f0dd96faaa86d6487ce05891e97173b5f3ea29f03da3307b4d88faeed7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The acquirer shall measure 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.") the assets and liabilities recognized under paragraph [944-805-25-3](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-3). However, the acquirer shall recognize that fair value in components as follows: 1. a Assets and liabilities measured in accordance with the acquirer's accounting policies for 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 that it issues or holds. For example, the contractual assets acquired could include a [reinsurance recoverable](https://asc.understandingaccounting.org/glossary/r/#reinsurance-recoverable "All amounts recoverable from reinsurers for paid and unpaid claims and claim settlement expenses, including estimated amounts receivable for unsettled claims, claims incurred but not reported, or policy benefits.") and the liabilities assumed could include a liability to pay future contract claims and claims expenses on the unexpired portion of the acquired contracts and a liability to pay incurred contract claims and claims expenses. However, those assets acquired and liabilities assumed would not include the acquiree's 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.") and unearned premiums that do not represent future cash flows. 2. b An intangible asset (or occasionally another liability), representing the difference between the following: 1. 1 The fair value of the contractual insurance and reinsurance assets acquired and liabilities assumed 2. 2 The amount described in (a). ##### [805-944-30-2](https://asc.understandingaccounting.org/asc/805/944/#805-944-30-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:53.577Z to 2026-09-10T01:26:53.577Z Record version: sha256:3e83496a738e24fdce26896ca81529ab8c83f5a3f09b63fdeb4adaa8903910ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Other related contracts that are not insurance or reinsurance contracts shall be measured at the date of acquisition in accordance with Topic 805. ### Demutualizations #### Emergence of Earnings and Policyholder Dividend Obligation ##### [805-944-30-3](https://asc.understandingaccounting.org/asc/805/944/#805-944-30-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:53.577Z to 2026-09-10T01:26:53.577Z Record version: sha256:afc375f737db5096ac2f56aba952b9c6365088c4ed7a3b4dbfd93d2170bf8405 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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."), a calculation shall be developed that represents the cash flows expected to be generated from the assets and liabilities included in 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."). Based on that [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."), the periodic expected 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.") (on the basis of generally accepted accounting principles \[GAAP\]), which is after the elimination of the effect of the applicable items of other comprehensive income shall be derived. The actuarial calculation shall be based on a best estimate (with no provision for adverse deviation) of the future performance of the closed block assets and liabilities as of the actuarial calculation date. ##### [805-944-30-4](https://asc.understandingaccounting.org/asc/805/944/#805-944-30-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:53.577Z to 2026-09-10T01:26:53.577Z Record version: sha256:b63f686299f3facfdcf764ce1f339a9fcf472b6cb257a5ac1bcbd6604e4bb06b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The actuarial calculation described in the preceding paragraph shall continue to be used in subsequent accounting periods to determine the change in the policyholder dividend obligation. The actuarial calculation shall not be revised in future accounting periods. 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. Source downloaded (UTC): 2026-09-10T01:26:58.447Z to 2026-09-10T01:26:58.447Z Record version: sha256:bd00de540ff3c559a01dc63f4012a265c1dc749e140edfe2e8fbcd142cb6f2fd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 805-944-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/805/944/#45-other-presentation-matters) SEC content: no ### Demutualizations #### Closed Block ##### [805-944-45-1](https://asc.understandingaccounting.org/asc/805/944/#805-944-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:58.447Z to 2026-09-10T01:26:58.447Z Record version: sha256:e99163a39dcb02d0ef446b450132a5ed27d2f562d2890daeaeeb87ae5f8cfedc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [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.") assets, liabilities, revenues, and expenses shall be displayed together with all other assets, liabilities, revenues, and expenses of the insurance entity based on the nature of the particular item, with appropriate disclosures relating to the closed block. See the [Demutualizations Subsection](https://asc.understandingaccounting.org/updates/page-2147479835/) of Section 944-805-50. #### Emergence of Earnings and Policyholder Dividend Obligation ##### [805-944-45-2](https://asc.understandingaccounting.org/asc/805/944/#805-944-45-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:58.447Z to 2026-09-10T01:26:58.447Z Record version: sha256:26a66ece2046162f488bbbc11cc21371e2c12999abd27bd95321c02c981fc417 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Unrealized investment gains and losses, other items of accumulated other comprehensive income, and the amount of offsetting policyholder dividend obligation shall not be netted in the presentation of other comprehensive income. #### Expenses of Demutualization or Holding Entity Formation ##### [805-944-45-3](https://asc.understandingaccounting.org/asc/805/944/#805-944-45-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:58.447Z to 2026-09-10T01:26:58.447Z Record version: sha256:b21cda789c853c5b3bca7de3dc19043e936730463c5479bada412a0b81711596 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In connection with 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, an insurance entity will incur expenses, including those for legal services, actuarial services, printing, and postage. Direct and incremental costs related to a demutualization or formation of a mutual insurance holding entity shall be classified as a single line item within income from continuing operations. #### Date of Demutualization or Holding Entity Formation ##### [805-944-45-4](https://asc.understandingaccounting.org/asc/805/944/#805-944-45-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:58.447Z to 2026-09-10T01:26:58.447Z Record version: sha256:b842dad1e3e630669de52c74c65b4cc2a3553eb78878505c6fda1d0413ca29b2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Depending on the form of demutualization, a reclassification of retained earnings at the [date of demutualization](https://asc.understandingaccounting.org/glossary/d/#date-of-demutualization "The date the plan of reorganization becomes effective.") may be appropriate. An insurance entity that demutualizes in a [distribution-form demutualization](https://asc.understandingaccounting.org/glossary/d/#distribution-form-demutualization "A situation in which eligible policyholders receive stock, policy credits, additional policyholder benefits, cash, or rights to purchase stock at favorable terms.") shall reclassify all its retained earnings as of the [date of demutualization](https://asc.understandingaccounting.org/glossary/d/#date-of-demutualization "The date the plan of reorganization becomes effective.") to capital stock and additional paid-in capital accounts (the capital accounts). If the entity distributes cash or [policy credits](https://asc.understandingaccounting.org/glossary/p/#policy-credits "Additional values applied to a policy through dividends, increases in fund values, accumulation values or accumulation account values or extensions of coverages.") to policyholders in lieu of capital stock, as part of the demutualization, the distribution shall be recorded as a direct reduction to the appropriate capital accounts. A [subscription-form demutualization](https://asc.understandingaccounting.org/glossary/s/#subscription-form-demutualization "A situation in which eligible policyholders receive only the right to purchase stock in the insurance entity or its parent at terms essentially equivalent to the terms offered to independent third parties.") does not, by itself, result in reclassification of retained earnings. ##### [805-944-45-5](https://asc.understandingaccounting.org/asc/805/944/#805-944-45-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:26:58.447Z to 2026-09-10T01:26:58.447Z Record version: sha256:a4096535d1ecc8979d17c55eb875c3230fae4ec65e61efe78943ee8691cdf0a7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The equity accounts of a mutual insurance holding entity at the formation date shall be determined using the principles for transactions of entities under common control, with the amount of retained earnings of the demutualized insurance entity, before reclassification to the capital accounts, being reported as retained earnings of the mutual insurance holding entity. Because the accounting bases and carrying amounts of assets and liabilities are not changed as a consequence of demutualization or formation of a mutual insurance holding entity, the amounts in accumulated other comprehensive income also shall not be changed as a consequence of demutualization or formation of a mutual insurance holding entity. Source downloaded (UTC): 2026-09-10T01:27:01.511Z to 2026-09-10T01:27:01.511Z Record version: sha256:ed5059e36febbd6cf5275d0caae486a1eb0bdc48dc8bfb1cc989f859d8e01166 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 805-944-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/805/944/#50-disclosure) SEC content: no ##### [805-944-50-1](https://asc.understandingaccounting.org/asc/805/944/#805-944-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:01.511Z to 2026-09-10T01:27:01.511Z Record version: sha256:10695687b35c2ca307c7c62ccc14838591336dc424cff714f726118d2c5c07c0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The disclosures in paragraphs [350-30-50-1 through 50-3](https://asc.understandingaccounting.org/asc/350/30/#350-30-50-1) apply to the intangible assets recognized pursuant to paragraph [944-805-25-3](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-3). ### Demutualizations ##### [805-944-50-2](https://asc.understandingaccounting.org/asc/805/944/#805-944-50-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:01.511Z to 2026-09-10T01:27:01.511Z Record version: sha256:8d93e610952c1f74a763dc362c0e53b095dd6eb66d272aee0daeb19476f295f5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insurance entity shall disclose all of the following: 1. a The nature and terms of 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 2. b The basis of presentation and terms of operation of 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.") 3. c A general description of all of the following: 1. 1 The method of emergence of earnings from the closed block 2. 2 Presentation of assets and liabilities of the closed block 3. 3 The policyholder dividend obligation. ##### [805-944-50-3](https://asc.understandingaccounting.org/asc/805/944/#805-944-50-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:01.511Z to 2026-09-10T01:27:01.511Z Record version: sha256:11c4f778c3106a529b683261a235692cf8aea3211047cc813ccdfcf9dd0636de Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insurance entity that has formed a closed block shall disclose both of the following: 1. a A general description of the closed block, including all of the following: 1. 1 The purpose of the closed block 2. 2 The types of insurance policies included 3. 3 The nature of the cash flows that increase and decrease the amount of closed block assets and liabilities 4. 4 An indication of the continuing responsibility of the insurance entity to support the payment of contractual benefits, including the results of premium sufficiency or deficiency determined in accordance with paragraphs [944-60-25-7 through 25-9](https://asc.understandingaccounting.org/asc/944/60/#944-60-25-7) 5. 5 The nature of expenses charged to the closed block operations. 2. b Summarized financial data of the closed block as of, or for periods ending on the date of, the financial statements presented, which shall include, at a minimum, all of the following: 1. 1 The carrying amounts for the major types of invested assets of the closed block 2. 2 Future policy benefits and policyholders' account balances 3. 3 Policyholder dividend obligation 4. 4 Premiums 5. 5 Net investment income 6. 6 Realized investment gains and losses 7. 7 Policyholder benefits 8. 8 Policyholder dividends 9. 9 The amount of maximum future earnings remaining to inure to the benefit of stockholders from the assets and liabilities of the closed block 10. 10 An analysis of the changes in the policyholder dividend obligation. Example 2 (see paragraph [944-805-55-3](https://asc.understandingaccounting.org/asc/805/944/#805-944-55-3)) illustrates the application of these disclosure requirements. ##### [805-944-50-4](https://asc.understandingaccounting.org/asc/805/944/#805-944-50-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:01.511Z to 2026-09-10T01:27:01.511Z Record version: sha256:7f7a86e9e31649e52a422b50817de02ead8640e63d1794577bac720db5da1e3f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Disclosures that typically would be required by the preceding paragraph for the various specific elements included in the closed block need not be made separately for the closed block if the nature of the information for the closed block would not differ significantly from that already included for the reporting entity as a whole. For example, it is not necessary to show a separate schedule of contractual maturities of closed block fixed maturity securities if the relative composition of contractual maturities is similar to those of the reporting entity taken as a whole. However, if the relative maturities of the closed block fixed maturities securities differ from those of the reporting entity taken as a whole, separate disclosures shall be made. Source downloaded (UTC): 2026-09-10T01:27:03.516Z to 2026-09-10T01:27:03.516Z Record version: sha256:c647d6b4f4c33055e86f4f0a3366b9e78df988da4578ad0a418ba947965672a3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 805-944-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/805/944/#55-implementation-guidance-and-illustrations) SEC content: no ### Demutualizations #### Implementation Guidance ##### [805-944-55-1](https://asc.understandingaccounting.org/asc/805/944/#805-944-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:03.516Z to 2026-09-10T01:27:03.516Z Record version: sha256:6f0a0e79f4e3a968ce0166f956737c167f9c45da140f9f4165777d82e673a5a9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A stock dividend declared by the stock insurer shall be accounted for in accordance with the guidance in Subtopic 505-20. Under existing laws or regulations, a mutual insurance holding entity is required to own a controlling voting interest in the stock insurance subsidiary and, therefore, shall reflect the stock insurer or intermediate holding entity on a consolidated basis. As a result, intra-entity dividends would be eliminated in the consolidated accounts of the mutual insurance holding entity. #### Illustrations ##### [805-944-55-2](https://asc.understandingaccounting.org/asc/805/944/#805-944-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:03.516Z to 2026-09-10T01:27:03.516Z Record version: sha256:a663cc9866bd552d88f00f52617f288bf912283658670408c5512100952e5b0b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates emergence of earnings as discussed beginning in paragraph [944-805-25-8](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-8). As part of the negotiations surrounding 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.") and [demutualization](https://asc.understandingaccounting.org/glossary/d/#demutualization "The conversion of a mutual insurance entity to a stock insurance entity.") process, the insurance entity may agree with the insurance regulator to designate participating policies with a [carrying amount](https://asc.understandingaccounting.org/glossary/c/#carrying-amount "The amount of an item as displayed in the financial statements.") (liability) of $2,500,000,000 for the closed block. Fixed maturity available-for-sale investments with a carrying value and [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.") of $2,300,000,000 and an amortized cost of $2,240,000,000 are designated as the closed block assets. If there are no other assets or liabilities included in the closed block, the maximum future earnings from the closed block that would be recognized in income over the period in which the closed block remains [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.") is $260,000,000. ##### [805-944-55-3](https://asc.understandingaccounting.org/asc/805/944/#805-944-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:03.516Z to 2026-09-10T01:27:03.516Z Record version: sha256:eb041e12054528670efc2947cc2c7f662344e57ffc59c83dde1ab36669b4746e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates one application of the disclosure requirements of the [Demutualizations Subsection](https://asc.understandingaccounting.org/updates/page-2147479835/) of Section 944-805-50 for a single hypothetical insurance entity, referred to as ABC Life Insurance Entity. ABC Life Insurance Entity would make the following disclosures. - At the effective date (January XX, 20X1) of the Plan of Demutualization, eligible policyholders received, in the aggregate, approximately $XX million of cash, $XX million of policy credits, and XX million shares of common stock of ABC Holding Entity in exchange for their membership interests in ABC Life Insurance Entity. The demutualization was accounted for as a reorganization. Accordingly, ABC Life Insurance Entity's retained earnings at the Plan Effective Date (net of the aforementioned cash payments and policy credits, which were charged directly to retained earnings) were reclassified to common stock and capital in excess of par. - As of January XX, 20X1, ABC Life Insurance Entity established a closed block for the benefit of certain classes of individual participating policies for which ABC Life Insurance Entity had a dividend scale payable in 20X0 and that were in force on January XX, 20X1. Assets were allocated to the closed block in an amount that, together with anticipated revenues from policies included in the closed block, was reasonably expected to be sufficient to support such business, including provision for payment of benefits, certain expenses, and taxes, and for continuation of dividend scales payable in 20X0, assuming experience underlying such scales continues. Assets allocated to the closed block inure solely to the benefit of the holders of the policies included in the closed block and will not revert to the benefit of stockholders of ABC Life Insurance Entity. No reallocation, transfer, borrowing, or lending of assets can be made between the closed block and other portions of ABC Life Insurance Entity's general account, any of its separate accounts, or any affiliate of ABC Life Insurance Entity without the approval of the Z State Insurance Department. - If, over time, the aggregate performance of the closed block assets and policies is better than was assumed in funding the closed block, dividends to policyholders will be increased. If, over time, the aggregate performance of the closed block assets and policies is less favorable than was assumed in the funding, dividends to policyholders could be reduced. - The assets and liabilities allocated to the closed block are recognized in ABC Life Insurance Entity's financial statements on the same basis as other similar assets and liabilities. The carrying amount of closed block liabilities in excess of the carrying amount of closed block assets at the date of demutualization (adjusted to eliminate the effect of related amounts in accumulated other comprehensive income) represents the maximum future earnings from the assets and liabilities designated to the closed block that can be recognized in income over the period the policies in the closed block remain in force. ABC Life Insurance Entity has developed an actuarial calculation of the timing of such maximum future stockholder earnings, and this is the basis of the policyholder dividend obligation. - If actual cumulative earnings are greater than expected cumulative earnings, only expected earnings will be recognized in income. Actual cumulative earnings in excess of expected cumulative earnings represents undistributed accumulated earnings attributable to policyholders, which are recognized as a policyholder dividend obligation because the excess will be paid to closed block policyholders as an additional policyholder dividend unless otherwise offset by future performance of the closed block that is less favorable than originally expected. If actual cumulative performance is less favorable than expected, only actual earnings will be recognized in income. - The principal cash flow items that affect the amount of closed block assets and liabilities are premiums, net investment income, purchases and sales of investments, policyholders' benefits, policyholder dividends, premium taxes, and income taxes. The principal income and expense items excluded from the closed block are management and maintenance expenses, commissions and net investment income, and realized investment gains and losses of investment assets outside the closed block that support the closed block business. The amounts shown in the following tables for assets, liabilities, revenues, and expenses of the closed block are those that enter into the determination of amounts that are to be paid to policyholders. ##### [805-944-55-4](https://asc.understandingaccounting.org/asc/805/944/#805-944-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:03.516Z to 2026-09-10T01:27:03.516Z Record version: sha256:510718d634a4fcd959d108146aa27504f16c3468216231a910b99604dd0a3069 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ABC Life Insurance Entity may present summarized financial information for the closed block in a table as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-BF693EFC-EF81-4256-89D3-FE4F8B91D84A-low.gif) "December 31, 20X2" 20X2 Activity (a) "December 31, 20X1" Closed block liabilities: Future policy benefits and policyholder account balances " $8,903 " $(8) B " $8,911 " Policyholder dividends payable 88 88 Policyholder dividend obligation 163 93 E 80 (10) C Other closed block liabilities 12 12 Total closed block liabilities " 9,166 " 75 " 9,091 " Assets designated to the closed block: Fixed maturities: "Held to maturity, at amortized cost (estimated fair value, 20X2, $275; 20X1, $319)" 289 289 "Available for sale, at estimated fair value (amortized cost, 20X2, $3,809; 20X1, $3,502)" " 4,001 " " 307 93 " " D E " " 3,601 " "Equity securities, at estimated fair value" 202 202 Mortgage loans on real estate " 1,273 " (307) D " 1,580 " Policy loans " 1,766 " " 1,766 " Real estate 105 105 Short-term investments 62 62 Cash and cash equivalents 119 82 A 37 Other closed block assets 76 76 Total closed block assets " 7,893 " 175 " 7,718 " Excess of reported closed block liabilities over assets designated to the closed block " 1,273 " (100) " 1,373 " Portion of above representing other comprehensive income -increase in unrealized appreciation 192 93 99 -increase in policyholder dividend obligation (93) (93) Total 99 - 99 Maximum future earnings to be recognized from closed block assets and liabilities " $1,372 " $(100) " $1,472 " Change in Policyholder Dividend Obligation: "December 31, 20X2" "December 31, 20X1" Balance at beginning of year $80 $- Impact on net income before income taxes (10) 5 Unrealized investment gains (losses) 93 75 Balance at end of year $163 $80 Change in Other Comprehensive Income: "December 31, 20X2" Change for 20X2 "December 31, 20X1" Fixed maturities available for sale: Fair value " $4,001 " $400 " $3,601 " Amortized cost " 3,809 " 307 D " 3,502 " Unrealized appreciation $192 $93 E $99 (a) "Assumed 20X2 activity for assets and liabilities (similarly identified in statement of operations as applicable): A items are assumed settled in cash, with net impact reflected in "Cash and cash equivalents." B and C are given effect in their respective balance sheet accounts. D represents the assumed sale of mortgage loans at book value and reinvestment of the proceeds in available-for-sale fixed maturities. E represents the increase in unrealized appreciation on available-for-sale securities held at both December 31, 20X1 and December 31, 20X2. It is assumed that there are no related taxes and that the available-for-sale fixed maturities sold (see above) had fair value equal to book value both at December 31, 20X1, and when sold. It is further assumed that the unrealized appreciation at December 31, 20X1, is equal to that at the date of demutualization. Unrealized appreciation that arises since the date of demutualization is to be included in the determination of the policyholder dividend obligation." ##### [805-944-55-5](https://asc.understandingaccounting.org/asc/805/944/#805-944-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:03.516Z to 2026-09-10T01:27:03.516Z Record version: sha256:8f6dd568c58821a23d871b1aa0225003fe6303ebdb208426b766f7eced48ff59 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ABC Life Insurance Entity may present additional summarized financial information for the closed block in a table as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-007EA11C-044A-4487-BA20-E613F05CCA17-low.gif) 20X2(a) 20X1 Closed Block Operations: Closed block revenues: Premiums $303 A $318 Net investment income 205 A 215 Realized investment gains (losses) (2) A 10 Other closed block revenues 5 A 5 Total closed block revenues 511 548 Closed block benefits and expenses: Policyholder benefits 402 A 376 Change in policyholder benefits and interest credited to policyholder account balances (8) B 17 Dividends to policyholders 8 A 8 Change in policyholder dividend obligation (10) C 5 Other closed block expenses 10 A 10 Total closed block benefits and expenses 402 416 "Closed block revenues, net of closed block benefits and expenses, before income taxes" 109 132 Income taxes 9 A 10 "Closed block revenues, net of closed block benefits and expenses and income taxes" $100 $122 Maximum future earnings from closed block assets and liabilities: Beginning of year " $1,472 " " $1,594 " End of year " 1,372 " " 1,472 " Change during the year $(100) $(122) (a) "Assumed 20X2 activity for assets and liabilities (similarly identified in statement of operations as applicable): A items are assumed settled in cash, with net impact reflected in "Cash and cash equivalents." B and C are given effect in their respective balance sheet accounts." ##### [805-944-55-6](https://asc.understandingaccounting.org/asc/805/944/#805-944-55-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:03.516Z to 2026-09-10T01:27:03.516Z Record version: sha256:c9682e00e9f6e8bef02d8b998363ab69594c1670a83f7a7339440a204eb07ffc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the accounting under the Demutualizations Subsections of this Subtopic for closed block business (meaning those assets and liabilities both inside and outside of the closed block that relate to or support the closed block policies) after the demutualization date. This Example illustrates the computations involved in the following: 1. a Determining the amount of the policyholder dividend obligation 2. b [Subparagraph superseded by Accounting Standards Update No. 2018-12](https://asc.understandingaccounting.org/updates/asu-2018-12/). 3. c [Subparagraph superseded by Accounting Standards Update No. 2018-12](https://asc.understandingaccounting.org/updates/asu-2018-12/). ##### [805-944-55-7](https://asc.understandingaccounting.org/asc/805/944/#805-944-55-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:03.516Z to 2026-09-10T01:27:03.516Z Record version: sha256:9e7efb00990664900cb2fc9d12dd8060350e15f051ab3c4bbfcd353724b1a23d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For simplicity, this Example assumes the closed block has not been funded for income taxes. In practice, the closed block may or may not be funded for income taxes. If the closed block is funded for income taxes, the actuarial calculation would be constructed on a post-tax basis. However, for the purpose of determining the policyholder dividend obligation, pretax amounts should be used. Generally, this would be accomplished by converting post-tax actuarial calculation values to corresponding pretax values for purposes of determining the policyholder dividend obligation. If the closed block is funded for income taxes, a change in income tax rates would result in an experience gain or loss that would affect closed block cash flows. ##### [805-944-55-8](https://asc.understandingaccounting.org/asc/805/944/#805-944-55-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:03.516Z to 2026-09-10T01:27:03.516Z Record version: sha256:56904d1143628254fbf70a84228bb1ae0f160cd8db4d3132be86213d8a16c281 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The closed block business is assumed to be written in Year 1, with demutualization occurring at the end of Year 5. Present values are assumed at a discount rate of 8.5 percent. ##### [805-944-55-9](https://asc.understandingaccounting.org/asc/805/944/#805-944-55-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:03.516Z to 2026-09-10T01:27:03.516Z Record version: sha256:2d980591a41d4b62dc359ea1cc94af2ba952b6d88adcc6af7a498587b59a2ce8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As discussed beginning in paragraph [944-805-25-10](https://asc.understandingaccounting.org/asc/805/944/#805-944-25-10), the table in paragraph [944-805-55-10](https://asc.understandingaccounting.org/asc/805/944/#805-944-55-10) is based on the actuarial calculation for the closed block developed at the demutualization date and represents the expected 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.") (closed block deficit) over the life of the closed block. The data in that table would be compared to actual results throughout the life of the closed block to determine the need for a policyholder dividend obligation. That table assumes an increase in interest rates in Year 6 from 8.5 percent to 9.5 percent, which results in the board of directors increasing dividends in Years 7 through 10. The table assumes demutualization begins in Year 6. For purposes of the Example, all other assumptions are held constant and expenses are assumed to be excluded from the closed block. ##### [805-944-55-10](https://asc.understandingaccounting.org/asc/805/944/#805-944-55-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:03.516Z to 2026-09-10T01:27:03.516Z Record version: sha256:497c0f8837767e01b573da2d5abecd7e87e1aa0dbade384a0c9c9e1cf4f03f42 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Components of the illustrative closed block follow. - ![](https://asc.understandingaccounting.org/asc-img/GUID-96750B8C-37FC-48CE-98A0-ED519B7937ED-low.gif) Year Premium Interest on Closed Block Assets Interest on Current Activity Death Benefits Incurred Surrender Benefits Incurred (Increase) Decrease in Net Level Premium Reserve Dividend Incurred (Increase) Decrease in Policyholder Dividend Obligation (a) (b) (c) (d) (e) (f) (g) (h) 1 " $210,000 " $- " $17,850 " " $(9,000)" $- " $(126,103)" " $(18,857)" $- 2 " 184,611 " " 7,231 " " 15,692 " " (10,549)" - " (109,116)" " (21,399)" - 3 " 169,621 " " 7,846 " " 14,418 " " (13,731)" " (7,148)" " (93,669)" " (24,230)" - 4 " 155,763 " " 8,512 " " 13,240 " " (14,835)" " (14,984)" " (79,754)" " (26,574)" - 5 " 142,990 " " 9,236 " " 12,154 " " (15,661)" " (21,760)" " (67,117)" " (28,509)" - 6 " 131,222 " " 11,200 " " 12,466 " " (15,622)" " (17,237)" " (73,236)" " (30,043)" " (2,491)" 7 " 124,333 " " 17,839 " " 10,568 " " (16,578)" " (20,989)" " (66,499)" " (33,061)" 549 8 " 117,768 " " 24,819 " " 10,010 " " (16,824)" " (24,427)" " (60,005)" " (35,127)" 595 9 " 111,526 " " 31,298 " " 9,480 " " (17,526)" " (27,566)" " (53,706)" " (36,990)" 646 10 " 105,582 " " 37,266 " " 8,974 " " (18,603)" " (30,406)" " (47,485)" " (38,675)" 701 11-20 " 779,517 " " 585,648 " " 66,259 " " (311,112)" " (398,831)" " (162,077)" " (424,092)" - 21-55 " 589,392 " " 1,103,633 " " 50,099 " " (1,187,632)" " (686,079)" " 938,767 " " (669,668)" - Total " $2,822,325 " " $1,844,528 " " $241,210 " " $(1,647,673)" " $(1,249,427)" $- " $(1,387,225)" $- Notes: (a) Gross premiums. (b) Interest at 8.5 percent on the liability for future policy benefits at the end of the previous year. (c) "Interest at 8.5 percent on current-year cash flow. This illustration assumes that premiums are received and all expenses are incurred at the start of the year. This illustration assumes that death benefits, surrender benefits, and dividends are all at the end of the year." (d) Death benefits not reduced by related liability for future policy benefits. (e) Surrender benefits not reduced by related liability for future policy benefits. (f) Represents the cumulative (increase) decrease in the liability for future policy benefits. (g) Policyholder dividends for the year. (h) Policyholder dividend obligation as of end of last year minus policyholder dividend obligation as of end of current year. ##### [805-944-55-11](https://asc.understandingaccounting.org/asc/805/944/#805-944-55-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:03.516Z to 2026-09-10T01:27:03.516Z Record version: sha256:a06deaf3787760c0791f2ff0d98c9cd6a8af04db73bb57c30a898af5b4a63d74 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For purposes of the table in paragraph [944-805-55-10](https://asc.understandingaccounting.org/asc/805/944/#805-944-55-10), the product of the closed block policyholder dividend obligation calculation follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-162A2E03-9916-4063-8215-49C4B1ACF713-low.gif) Actual as of Measurement Date " $18,750 " - Initial Actuarial Calculation " $16,259 " = Policyholder Dividend Obligation at Measurement Date " $2,491 " ##### [805-944-55-12](https://asc.understandingaccounting.org/asc/805/944/#805-944-55-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:03.516Z to 2026-09-10T01:27:03.516Z Record version: sha256:3e88d7393f813a2ff78d9f9e0f09beaf074e074d207825f547d6c9d4c2e34434 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2018-12](https://asc.understandingaccounting.org/updates/asu-2018-12/). ##### [805-944-55-13](https://asc.understandingaccounting.org/asc/805/944/#805-944-55-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:03.516Z to 2026-09-10T01:27:03.516Z Record version: sha256:7a3c829bb0d5aa7d97eb9ad69d2ba691620a8bbc14da188f1da3cc218fca4ed9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2018-12](https://asc.understandingaccounting.org/updates/asu-2018-12/). Source downloaded (UTC): 2026-09-10T01:27:07.338Z to 2026-09-10T01:27:07.338Z Record version: sha256:c9dcd436c823725cd5cfd71b927e4f611894983fc420102312f7c58ab7615e4b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 805-944-S25: SEC 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/805/944/#sec-25-recognition) SEC content: yes #### Accounting by the Purchaser for a Seller's Guarantee of the Adequacy of Liabilities for Losses and Loss Adjustment Expenses Acquired in a Purchase Business Combination ##### [805-944-S25-1](https://asc.understandingaccounting.org/asc/805/944/#805-944-S25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:07.338Z to 2026-09-10T01:27:07.338Z Record version: sha256:220dde556a609d1b59efc0adb91ad394098a2e13d0364269a3f2d1c436671d3c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [944-805-S99-1](https://asc.understandingaccounting.org/asc/805/944/#805-944-S99-1), SEC Observer Comment: Accounting by the Purchaser for a Seller's Guarantee of the Adequacy of Liabilities for Losses and Loss Adjustment Expenses Acquired in a Purchase Business Combination, for related SEC Staff views. Source downloaded (UTC): 2026-09-10T01:27:09.747Z to 2026-09-10T01:27:09.747Z Record version: sha256:b287d2d12447c6a347fb03080bb03a294f1e45defe48d70ea007609a579eb175 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 805-944-S99: SEC 99 SEC Materials [Read section](https://asc.understandingaccounting.org/asc/805/944/#sec-99-sec-materials) SEC content: yes #### SEC Staff Guidance ##### [805-944-S99-1](https://asc.understandingaccounting.org/asc/805/944/#805-944-S99-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:27:09.747Z to 2026-09-10T01:27:09.747Z Record version: sha256:ae33580f8608eeda3335f1776cc4f3045e424ab768db1adf1bc4b684768b162e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SEC Observer Comment: Accounting by the Purchaser for a Seller's Guarantee of the Adequacy of Liabilities for Losses and Loss Adjustment Expenses Acquired in a Purchase Business Combination. - The SEC staff believes it is preferable to present the effects of the loss guarantee on a gross rather than net basis. Any receivable from the seller should not be netted against the related liability in the balance sheet or in supporting information such as footnotes or SEC Industry Guide 6 disclosures. The SEC staff also expressed a preference that (1) any expense associated with increased reserves be reported as a component of other claim losses and loss adjustment expenses and (2) other claim losses and loss adjustment expenses not be reduced by the effect of the reserve guarantee. - The SEC staff would not object to claim losses and loss adjustment expenses being reported net of the effect of the reserve guarantee in the income statement. A net presentation is appropriate only if the effects of the reserve guarantee are disclosed separately in the notes to the financial statements, in the SEC Industry Guide 6 disclosures including the reconciliation of claims reserves, and in the loss ratio information.