# ASC 944-20-35: Financial Services—Insurance — Insurance Activities — 35 Subsequent Measurement Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/944/20/#35-subsequent-measurement) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:2b5b64e8dc9e8ca7fc10785105cd62e4835fc4245d10dd62583f8e6b78733e53 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 944-20-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/944/20/#35-subsequent-measurement) SEC content: no ### Short-Duration Contracts #### Multiple-Year Retrospectively Rated Insurance Contracts ##### [944-20-35-1](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:78dfd59decafce3d2f756802eed5e8846e542256f472204c53371f578276e856 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As indicated in paragraph [944-20-25-2(a)](https://asc.understandingaccounting.org/asc/944/20/#944-20-25-2), certain amounts are recognized by the insurer and insured to the extent that the insured has an obligation to pay cash (or other consideration) to the insurer that would not have been required absent the experience under the contract.The amount recognized in the current period shall be computed, using a with-and-without method, as the difference between the insured's total contract costs before and after the experience under the contract as of the reporting date, including costs such as premium adjustments, settlement adjustments, and impairments of [coverage](https://asc.understandingaccounting.org/glossary/c/#coverage "An insurance entity's exposure to loss. The concept of coverage would typically include policy limits, deductible, insured, and covered property or insured event."). The amount of premium expense related to impairments of coverage shall be measured in relation to the [original contract](https://asc.understandingaccounting.org/glossary/o/#original-contract "A contract that was initially entered into by the contract holder before any potential internal replacement activity.") terms. Future experience under the contract (that is, future losses and future premiums that would be paid regardless of past experience) shall not be considered in measuring the amount to be recognized. ##### [944-20-35-2](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:f9c84c9668abf456cc5df916d8bbcce5dde6e8db06dfbd67d754f783ad4f2248 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insurer shall account for changes in coverage in the same manner as changes in other contract costs. For example, the effects of decreases in coverage without a commensurate reduction in premium shall be recognized as a gain by the insurer when the event causing the decrease in coverage takes place. ### Reinsurance Contracts #### Multiple-Year Retrospectively Rated Contracts by Ceding and Assuming Entities ##### [944-20-35-3](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:1facf9b8938220ac1f5426a345d2d2da2b58a8645d8bbde15753381a07f394af Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The amount recognized under paragraph [944-20-25-4](https://asc.understandingaccounting.org/asc/944/20/#944-20-25-4) in the current period shall be computed, using a with-and-without method, as the difference between the ceding entity's total contract costs before and after the experience under the contract as of the reporting date, including costs such as premium adjustments, settlement adjustments, and impairments of [coverage](https://asc.understandingaccounting.org/glossary/c/#coverage "An insurance entity's exposure to loss. The concept of coverage would typically include policy limits, deductible, insured, and covered property or insured event."). ##### [944-20-35-4](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:0d862d0381bc5884be2aeb127cee8c56a9f145f2aa165a80b508136790f20b77 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The amount of premium expense related to impairments of coverage shall be measured in relation to the [original contract](https://asc.understandingaccounting.org/glossary/o/#original-contract "A contract that was initially entered into by the contract holder before any potential internal replacement activity.") terms. Future experience under the contract (that is, future losses and future premiums that would be paid regardless of past experience) shall not be considered in measuring the amount to be recognized. ##### [944-20-35-5](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:0be4df6da523ebd991c81ed849fcd9520d52fd8ed92a9023307035393ed5c1e3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Example 1 (see paragraph [944-20-55-60](https://asc.understandingaccounting.org/asc/944/20/#944-20-55-60)) illustrates the application of this guidance. ##### [944-20-35-6](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:22d2879a54aace31c431e0eb4d5ad74142b750fc2f873f624ed89a2958da00d0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The amount of the asset to be recognized may be affected by credit risk, and appropriate valuation allowances shall be established for any amounts deemed uncollectible. However, the [ceding entity](https://asc.understandingaccounting.org/glossary/c/#ceding-entity "The party that pays a reinsurance premium in a reinsurance transaction. The ceding entity receives the right to reimbursement from the assuming entity under the terms of the reinsurance contract.") shall not consider the likelihood of future losses in evaluating whether the asset is realizable at the financial reporting date. The effect of those future losses on the asset, if any, shall be recognized in the period of the loss. Potential future unfavorable development on the incurred losses covered by the contract shall not be considered in measuring the asset at the financial reporting date. The relevant recorded [claim](https://asc.understandingaccounting.org/glossary/c/#claim "A demand for payment of a policy benefit because of the occurrence of an insured event.") liability at that date represents the ceding entity's best estimate of the expected ultimate claim liability, and is the liability that must be used in measuring the refundable amount based on contract experience to date. ##### [944-20-35-7](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:3303ad6bf9264a9ce2aa46314c4dc76e7dc5811953384878bbd3b244f38b80fc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Recognizing a smaller asset based on potential unfavorable loss development implies that claim liabilities are understated at the financial reporting date. Accordingly, changes in estimates of claim liabilities shall not be recognized in measuring the related asset until the change in estimate takes place. ##### [944-20-35-8](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:f23170701d570b45989d59d99dafc306de0f862df3aa31e7bcfee5bc78d23a11 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The remainder of this Subsection addresses the following matters: 1. a Changes in coverage 2. b Loss recognition 3. c With-and-without method 4. d Multiple contingent contractual features 5. e Payment for continuation of contract 6. f Contract cancellation. ##### [944-20-35-9](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-9) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:774b6cf977257f46667901b7884dc408b81ef444f73cfce124c1e1203a6e503d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The ceding entity and the assuming entity shall account for changes in coverage in the same manner as changes in other contract costs. ##### [944-20-35-10](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-10) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:1285d74e01f0a6971acf142c29d84bfffd9ae4708b663344ecd803a8580844a0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For example, the effects of decreases in coverage without a commensurate reduction in premium shall be recognized as a loss by the ceding entity and as a gain by the assuming entity when the event causing the decrease in coverage takes place. ##### [944-20-35-11](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-11) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:8ef6e8cff68034be764fbce1d1772e7698a15c8084256e2bdf35140433be3370 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Changes in either the probability or amount of potential future recoveries are considered a change in coverage. For example, if the contract limit stayed the same, but the ceding entity could not receive any recoveries unless losses for the industry as a whole reached a certain level, coverage has been reduced. What matters is not the specific contract provisions regarding coverage, but whether the probability or amount of potential future recoveries has increased or decreased as a result of those provisions. ##### [944-20-35-12](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-12) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:9650faf06e52effa36c13bbed85dc16e7c5b47227787b75df760047664b054c6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Deposit accounting shall not be used to avoid loss recognition that would otherwise be required; for example, if the ceding entity has no future coverage relating to the deposit with the [reinsurer](https://asc.understandingaccounting.org/glossary/r/#reinsurer "The assuming entity in a reinsurance transaction.") and therefore the deposit is not recoverable. ##### [944-20-35-13](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-13) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:bfbca1549af128b215ee3db3dd2e64a48731fde2e422d80ff162403688e8205e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). ##### [944-20-35-14](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-14) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:b4f645a56b31d93c0466cd4ad31157d5a415fa9298c00941abb8460659a62510 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In some circumstances, the ceding entity will be relieved of its obligation if the reinsurer cancels the contract, and only has to pay additional amounts if either: 1. a The contract 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."). 2. b The ceding entity cancels before the end of the contract term. Unless the reinsurer has terminated the contract, the ceding entity has an obligation for the additional amounts and must recognize the related liability. The effect of termination, which is to relieve the ceding entity of its liability, shall not be recognized until termination takes place. ##### [944-20-35-15](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-15) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:9d5198e2124cca51bd4d2975fe2b1fd2ad9ae7c3658f19eff1d07716ab87434f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cash or other compensation equal to all or part of the positive fund balance received from the reinsurer if the ceding entity's contract continues in force shall be recognized as an asset because the ceding entity controls whether termination takes place and, thus, controls realization of the future economic benefit. ##### [944-20-35-16](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-16) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:19e756cdb26427b6dcbebaee619d05d0130ecb0cd091957a247301cbd4a82cf3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [944-20-25-6](https://asc.understandingaccounting.org/asc/944/20/#944-20-25-6) states that, if either entity entering into a new contract in consideration for canceling a retrospectively rated contract would not have agreed to cancel the existing retrospectively rate contract unless a new contract were entered into, the two contracts are in effect the same contract for purposes of measuring assets and liabilities and shall be accounted for that way. #### Multiple-Year Retrospectively Rated Contract Terminated by the Ceding Entity ##### [944-20-35-17](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-17) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:e5a5a59c39d0d8f2be3517fa176b077b7d3c55f1d281d03e6b0ee00b5233a8ca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following paragraph applies to contracts having both of the following characteristics: 1. a The ceding entity could terminate the contract before the end of its term. 2. b Termination would change the amounts paid—for example, if terminating the contract would cost less than continuing the contract in force. ##### [944-20-35-18](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-18) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:91e6fa26a6910ad12a06f11cb3a55dcf66c3306f5a9eedde3009dbbca54f1abf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The liability resulting from a contract having the characteristics in the preceding paragraph shall be measured as follows: 1. a If a decision to terminate has been made, the measurement shall be based on an assumption of termination and experience to date. 2. b If a decision to terminate has not been made, the measurement shall be based on the lesser of the following: 1. 1 The total incremental cost that would be paid based on the with-and-without calculation assuming experience to date and assuming termination—that is, excluding the effects of future losses and future premiums that would have been paid regardless of experience to date 2. 2 The total incremental cost that would be paid based on the with-and-without calculation assuming experience to date and assuming no termination—that is, excluding the effects of future losses and future premiums that would have been paid regardless of experience to date. ##### [944-20-35-19](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-19) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:16.265Z to 2026-09-10T02:15:16.265Z Record version: sha256:fc80ad91f2ab8626165644d6a2fc4ade147e6a91fa5fd240b671e1b7ec9bad6c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As indicated in paragraph [944-20-35-18](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-18), if a decision to terminate a contract has been made, the measurement of the liability shall be based on the assumption of [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.") and experience to date. Otherwise, the measurement of the liability shall be based on the lesser of the following: 1. a The total incremental cost that would be paid based on the with-and-without method assuming experience to date and assuming termination 2. b The total incremental cost that would be paid based on the with-and-without method assuming experience to date and assuming no termination. The effects of future losses and future premiums that would have been paid regardless of experience to date shall be excluded from both calculations. Costs associated with the decision not to terminate shall be recognized in the period in which the future coverage is provided because those costs are associated with that future coverage.