{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/815/944/#25-recognition","source":"FASB Accounting Standards Codification, Basic View","usage":"Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.","topic":"815","topic_title":"Derivatives and Hedging","subtopic":"815-944","subtopic_title":"Financial Services—Insurance","section":{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":"Long-Duration Contracts","heading":"Traditional Variable Annuity Product Structures","paragraphs":[{"citation":"815-944-25-1","para":"25-1","html":"
In concluding that certain traditional variable annuity product structures (see paragraph 944-20-05-18) do not contain embedded derivatives, paragraph 815-15-55-55(b) through (c) does not refer to ownership of the assets specifically resting with either the policyholder or the insurer. While the policyholder is entitled to direct the investment of premiums into various approved funds, the insurance entity actually owns the investments. The guidance in (b) and (c) in that paragraph that a traditional variable annuity contract contains no embedded derivatives that warrant separate accounting under Subtopic 815-15 remains valid even though the insurer, rather than the policyholder, actually owns the assets.
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The following indicators provide the basis for concluding that a traditional variable annuity contract is not a hybrid instrument to be accounted for under paragraph 815-15-25-1:
  1. a
    The variable annuity contract is established, approved, and regulated under special rules applicable to variable annuities, such as state insurance laws, securities laws, and tax laws.
  2. b
    The assets underlying the contract are insulated from the general account liabilities of the insurance entity; that is, the policyholder is not subject to insurer default risk to the extent of the assets held in the separate account.
  3. c
    The policyholder's premium is invested in contract-approved separate accounts at the policyholder's direction.
  4. d
    The insurer must invest in the assets on which the account values are based.
  5. e
    The policyholder may redirect its investment among the contract-approved investment options.
  6. f
    The account values are based entirely on the performance of those directed investments.
  7. g
    All investment returns are passed through to the policyholder, including dividends, interest, gains, and losses.
  8. h
    The policyholder may redeem its interests at any time; however, it may be subject to surrender charges.
  9. i
    The policyholder has voting rights in certain separate account structures.
In addition, although the liability to policyholders is not specifically required by the Financial Services—Insurance Topic to be remeasured at fair value with changes reported in earnings, paragraphs 944-80-25-3, 944-80-30-1, and 944-80-35-2 require that an entity record a liability for traditional variable annuity contracts equal to the summary total of the fair value of the assets held in the separate account for the policyholders.
","snippet":"The following indicators provide the basis for concluding that a traditional variable annuity contract is not a hybrid instrument to be accounted for under paragraph 815-15-25-1:\n(a) The variable annuity contract is esta…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:50bcf94ee99454b12d440b3c7aa7f57de8e06d44c53323389bf91eaab7992c42","downloaded_from":"2026-09-10T01:40:37.969Z","last_downloaded_at":"2026-09-10T01:40:37.969Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478212","source_sha256":"322a0adcf35b2b18e4c2a0f61ddc8a62b245e41596ffbcd3d22615c6456039f6"}},{"citation":"815-944-25-3","para":"25-3","html":"
In determining the accounting for other seemingly similar structures, an entity shall not analogize to the guidance in the preceding paragraph due to the unique attributes of traditional variable annuity contracts and the fact that the guidance in that paragraph can be viewed as an exception for traditional variable annuity contracts issued by insurance entities.
","snippet":"In determining the accounting for other seemingly similar structures, an entity shall not analogize to the guidance in the preceding paragraph due to the unique attributes of traditional variable annuity contracts and th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5acdf7789bdf88407c00daaa07503f8df11028c54c87674278b1b2914bec6531","downloaded_from":"2026-09-10T01:40:37.969Z","last_downloaded_at":"2026-09-10T01:40:37.969Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478212","source_sha256":"322a0adcf35b2b18e4c2a0f61ddc8a62b245e41596ffbcd3d22615c6456039f6"}},{"citation":"815-944-25-4","para":"25-4","html":"
Paragraph superseded by Accounting Standards Update No. 2018-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2018-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:25fc58ed70851c3f4288b86a6b1ec594306bd36d7f414371770a30b5649728d9","downloaded_from":"2026-09-10T01:40:37.969Z","last_downloaded_at":"2026-09-10T01:40:37.969Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478212","source_sha256":"322a0adcf35b2b18e4c2a0f61ddc8a62b245e41596ffbcd3d22615c6456039f6"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c192c8eb9052c585225b5fb30088d181d3203ca6a9d0877c0ab3da15ea60ca88","downloaded_from":"2026-09-10T01:40:37.969Z","last_downloaded_at":"2026-09-10T01:40:37.969Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478212","source_sha256":"322a0adcf35b2b18e4c2a0f61ddc8a62b245e41596ffbcd3d22615c6456039f6"}},{"block":"Long-Duration Contracts","heading":"Nontraditional Variable Annuity Contracts","paragraphs":[{"citation":"815-944-25-5","para":"25-5","html":"
The host contract in a nontraditional variable annuity contract would be considered the traditional variable annuity that, as described in paragraph 944-815-25-1, does not contain an embedded derivative that warrants separate accounting. Certain nontraditional features other than market risk benefits may be considered embedded derivatives subject to the requirements of Subtopic 815-15.
","snippet":"The host contract in a nontraditional variable annuity contract would be considered the traditional variable annuity that, as described in paragraph 944-815-25-1, does not contain an embedded derivative that warrants sep…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4c57e2b01ddc96becf78f7f76ff9bd52d8cbe38f51115bf599d685f259608aa1","downloaded_from":"2026-09-10T01:40:37.969Z","last_downloaded_at":"2026-09-10T01:40:37.969Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478212","source_sha256":"322a0adcf35b2b18e4c2a0f61ddc8a62b245e41596ffbcd3d22615c6456039f6"}},{"citation":"815-944-25-6","para":"25-6","html":"
In determining the accounting for other seemingly similar structures, an entity shall not analogize to the guidance in the preceding paragraph due to the unique attributes of nontraditional variable annuity contracts and the fact that the guidance in that paragraph can be viewed as an exception for nontraditional variable annuity contracts issued by insurance entities.
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