# ASC 815-944-25: Derivatives and Hedging — Financial Services—Insurance — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/815/944/#25-recognition) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:40:37.969Z to 2026-09-10T01:40:37.969Z Record version: sha256:830d82adf2929a724435525fdcf07d2b2e2273f86fb3e82eba583a90c2d80e89 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 815-944-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/815/944/#25-recognition) SEC content: no ### Long-Duration Contracts #### Traditional Variable Annuity Product Structures ##### [815-944-25-1](https://asc.understandingaccounting.org/asc/815/944/#815-944-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:40:37.969Z to 2026-09-10T01:40:37.969Z Record version: sha256:ef1d734700b04a046744c48ad223eda910151372a9f9994d83b71038f82d7ce6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In concluding that certain [traditional variable annuity](https://asc.understandingaccounting.org/glossary/t/#traditional-variable-annuity "An insurance product in which all the contract holder's payments are used to purchase units of a separate account.") product structures (see paragraph [944-20-05-18](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-18)) do not contain embedded derivatives, paragraph [815-15-55-55(b) through (c)](https://asc.understandingaccounting.org/asc/815/15/#815-15-55-55) 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. ##### [815-944-25-2](https://asc.understandingaccounting.org/asc/815/944/#815-944-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:40:37.969Z to 2026-09-10T01:40:37.969Z Record version: sha256:50bcf94ee99454b12d440b3c7aa7f57de8e06d44c53323389bf91eaab7992c42 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/815/15/#815-15-25-1): 1. a The [variable annuity contract](https://asc.understandingaccounting.org/glossary/v/#variable-annuity-contract "An annuity in which the amount of payments to be made are specified in units, rather than in dollars. When payment is due, the amount is determined based on the value of the investments in the annuity fund.") 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](https://asc.understandingaccounting.org/glossary/g/#general-account "All operations of an insurance entity that are not reported in the separate account(s).") 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](https://asc.understandingaccounting.org/glossary/s/#separate-account "A separate investment account established and maintained by an insurance entity under relevant state insurance law to which funds have been allocated for certain contracts of the insurance entity or similar accounts used for foreign originated products. The term separate accounts includes separate accounts and subaccounts or investment divisions of separate accounts."). 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](https://asc.understandingaccounting.org/glossary/s/#surrender-charges "Amounts expected to be assessed against policyholder balances at contract redemption, whole or partial, regardless of how the charges are labeled, such as contingent deferred sales 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](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 changes reported in earnings, paragraphs [944-80-25-3](https://asc.understandingaccounting.org/asc/944/80/#944-80-25-3), [944-80-30-1](https://asc.understandingaccounting.org/asc/944/80/#944-80-30-1), and [944-80-35-2](https://asc.understandingaccounting.org/asc/944/80/#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. ##### [815-944-25-3](https://asc.understandingaccounting.org/asc/815/944/#815-944-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:40:37.969Z to 2026-09-10T01:40:37.969Z Record version: sha256:5acdf7789bdf88407c00daaa07503f8df11028c54c87674278b1b2914bec6531 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [815-944-25-4](https://asc.understandingaccounting.org/asc/815/944/#815-944-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:40:37.969Z to 2026-09-10T01:40:37.969Z Record version: sha256:25fc58ed70851c3f4288b86a6b1ec594306bd36d7f414371770a30b5649728d9 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/). #### Nontraditional Variable Annuity Contracts ##### [815-944-25-5](https://asc.understandingaccounting.org/asc/815/944/#815-944-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:40:37.969Z to 2026-09-10T01:40:37.969Z Record version: sha256:4c57e2b01ddc96becf78f7f76ff9bd52d8cbe38f51115bf599d685f259608aa1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/815/944/#815-944-25-1), does not contain an embedded derivative that warrants separate accounting. Certain nontraditional features other than [market risk benefits](https://asc.understandingaccounting.org/glossary/m/#market-risk-benefit "A contract or contract feature in a long-duration contract issued by an insurance entity that both protects the contract holder from other-than-nominal capital market risk and exposes the insurance entity to other-than-nominal capital market risk.") may be considered embedded derivatives subject to the requirements of Subtopic 815-15. ##### [815-944-25-6](https://asc.understandingaccounting.org/asc/815/944/#815-944-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:40:37.969Z to 2026-09-10T01:40:37.969Z Record version: sha256:5a25695d07113c665e17f77b078c58729ce39280460812ae0c084cd07d993863 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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.