# ASC 944-30-25: Financial Services—Insurance — Acquisition Costs — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/944/30/#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): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:7c9491759e5d51d79d5b944616091396f6bf41c4420908a84090495f5f81b8c3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 944-30-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/944/30/#25-recognition) SEC content: no ##### [944-30-25-1](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:e78716a92fd494b90718dbefd74bd57034b307a68ed246ace592a63ee00e1b9b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2010-26](https://asc.understandingaccounting.org/updates/asu-2010-26/). ##### [944-30-25-1A](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1A) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:a1a5ddf84b3cb56e88dd92884c65f57d6b7fbb2472cf7833d9fdc2893999fa8c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insurance entity shall capitalize only the following as acquisition costs related directly to the successful acquisition of new or renewal insurance contracts: 1. a [Incremental direct costs of contract acquisition](https://asc.understandingaccounting.org/glossary/i/#incremental-direct-cost-of-contract-acquisition "A cost to acquire an insurance contract that has both of the following characteristics: It results directly from and is essential to the contract transaction(s). It would not have been incurred by the insurance entity had the contract transaction(s) not occurred.") 2. b The portion of the employee's total compensation (excluding any compensation that is capitalized as incremental direct costs of contract acquisition) and payroll-related fringe benefits related directly to time spent performing any of the following acquisition activities for a contract that actually has been acquired: 1. 1 Underwriting 2. 2 Policy issuance and processing 3. 3 Medical and inspection 4. 4 Sales force contract selling. 3. c Other costs related directly to the insurer's acquisition activities in (b) that would not have been incurred by the insurance entity had the acquisition contract transaction(s) not occurred. 4. d [Subparagraph superseded by Accounting Standards Update No. 2014-09](https://asc.understandingaccounting.org/updates/asu-2014-09/). - If the application of the guidance in this paragraph results in the capitalization of acquisition costs that had not previously been capitalized by the insurance entity before fiscal years beginning after December 15, 2011, the insurance entity may elect to not capitalize those types of costs. This election shall be made before fiscal years beginning after December 15, 2011. - _\[**Editor's Note**: This accounting policy election was a one-time election upon the adoption of the amendments in Update 2010-26.\]_ ##### [944-30-25-1AA](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1AA) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:45c2b266232056abb43b7842baa00d60019f5330a60375b9df577b1bdc4d03f4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The costs of direct-response advertising shall be capitalized if both of the following conditions are met: 1. a The primary purpose of the advertising is to elicit sales to customers who could be shown to have responded specifically to the advertising. Paragraph [944-30-25-1D](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1D) discusses the conditions that must exist in order to conclude that the advertising's purpose is to elicit sales to customers who could be shown to have responded specifically to the advertising. 2. b The direct-response advertising results in probable future benefits. Paragraph [944-30-25-1G](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1G) discusses the conditions that must exist in order to conclude that direct-response advertising results in probable future benefits. ##### [944-30-25-1B](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1B) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:cfd36ff496761dcad1079187b6a943f96bc670a5d3d7077a48cde90f8b9c2dd8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To associate [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.") with related premium revenue, for acquisition costs that are charged to expense in proportion to premium revenue recognized under Subtopic 944-605, capitalized acquisition costs shall be allocated by groupings of insurance contracts consistent with the entity's manner of acquiring, servicing, and measuring the profitability of its insurance contracts. #### Primary Purpose to Elicit Sales to Customers Responding to the Advertising ##### [944-30-25-1C](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1C) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:90fe49231e2ad59fa7f73d1255dae3aea974ca9fb5ecf9818a15f50129940239 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As noted in paragraph [944-30-25-1AA(a)](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1AA), the first condition for capitalizing direct-response advertising is that the primary purpose of the advertising is to elicit sales to customers who could be shown to have responded specifically to the advertising. ##### [944-30-25-1D](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1D) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:837eb42505122f12d0af02b8acffaf77a8452c8acc175fddc17cb17753e72ac2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In order to conclude that advertising elicits sales to customers who could be shown to have responded specifically to the advertising, there must be a means of documenting that response, including a record that can identify the name of the customer and the advertising that elicited the direct response. Examples of such documentation include the following: 1. a Files indicating the customer names and the related direct-response advertisement 2. b A coded order form, coupon, or response card, included with an advertisement, indicating the customer name 3. c A log of customers who have made phone calls to a number appearing in an advertisement, linking those calls to the advertisement. ##### [944-30-25-1DD](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1DD) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:805fee41a61f238188d376c4c6f89e4897f5d0bcbacf8ba0411e5fbcd4fdb1a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Direct-response advertising activities exclude advertising that, though related to the direct-response advertising, is directed to an audience that could not be shown to have responded specifically to the direct-response advertising. For example, a television commercial announcing that order forms (that are direct-response advertising) soon will be distributed directly to some people in the viewing area would not be a direct-response advertising activity because the television commercial is directed to a broad audience, not all of which could be shown to have responded specifically to the direct-response advertising. #### Probable Future Benefits of Direct-Response Advertising ##### [944-30-25-1E](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1E) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:c004e8f5ab1e6a1877f9a563b166ecbe274933606f8f429c063d9b5a7e548132 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As noted in paragraph [944-30-25-1AA(b)](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1AA), the second condition for capitalizing direct-response advertising is that the direct-response advertising results in probable future benefits. ##### [944-30-25-1F](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1F) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:3df7a0942ddb4f7e4657024696099f2f8ff0e98b7e5270911915c59006b8a041 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The probable future benefits of direct-response advertising activities are probable future revenues arising from that advertising in excess of future costs to be incurred in realizing those revenues. ##### [944-30-25-1G](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1G) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:76b915fd55537729462f57aa4988a433e926ebfda4c992230d6a192a1f89b8e5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Demonstrating that direct-response advertising will result in future benefits requires persuasive evidence that its effects will be similar to the effects of responses to past direct-response advertising activities of the entity that resulted in future benefits. Such evidence shall include verifiable historical patterns of results for the entity. Attributes to consider in determining whether the responses will be similar include the following: 1. a The demographics of the audience 2. b The method of advertising 3. c The product 4. d The economic conditions. ##### [944-30-25-1H](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1H) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:b12ec0fd458fb463f197dda43de1870a1b945f44e3706d1c21353c1aecf5749b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Industry statistics would not be considered objective evidence that direct-response advertising will result in future benefits in the absence of the specific entity's operating history. If the entity does not have an operating history for a particular product or service but does have operating histories for other new products or services, statistics for the other products or services may be used if it can be demonstrated that the statistics for the other products or services are likely to be highly correlated to the statistics of the particular product or service being evaluated. For example, test market results for a new product or service may be used to support the view that the results of advertising for current new products or services are likely to be highly correlated with the results of advertising for new products or services previously sold by the entity. In the absence of the expectation of a high degree of correlation, a success rate based on historical ratios of successful products or services to total products or services introduced to the marketplace would not be a sufficient basis for reporting a portion of the costs of current-period advertising as resulting in assets. #### Direct-Response Advertising That Does Not Result in Probable Future Benefits ##### [944-30-25-1I](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1I) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:035b7694130b3ea256011e39e9ff76353b7de917138c7bb38319342122adca38 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Direct-response advertising costs that are not capitalized because it cannot be demonstrated that the direct-response advertising will result in future benefits shall not be retroactively capitalized in subsequent periods if historical evidence in those subsequent periods indicates that the advertising did in fact result in future benefits. #### Basis of Measurement ##### [944-30-25-1J](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1J) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:3301f40064807a25d86e0ec83f15c20909ae41488989b1e7a7945b2282b76dcc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Based on the potential customers and the probable customer response rates, direct-response advertising that is expected to produce future revenues generally is undertaken before the customers' identity is known. Such advertising is undertaken with the expectation that not all targets of the direct-response advertising will provide benefits but that the benefits created by the customers who do respond to the advertising will justify the total advertising costs. Accordingly, the cost of the direct-response advertising directed to all prospective customers, not only the cost related to the portion of the potential customers that are expected to respond to the advertising, shall be used to measure the amounts of such reported assets. #### Period and Extent of Expected Future Benefits ##### [944-30-25-1K](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1K) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:62fe2147365dfe9c8cb83df9cb317578f5b699eff7569e3c09838c33621c0e5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. There is no overriding guidance that would either permit or prohibit reporting the costs of direct-response advertising as assets based on the inclusion of future revenues from renewals or repeat sales. Reporting entities with an established operating history, such as certain entities in subscription businesses, may be able to measure such amounts with the required degree of reliability and, if so, shall report assets based on renewal amounts. The reporting entity must exercise judgment about both of the following: 1. a The existence of the degree of reliability required to determine the probability of renewals 2. b Whether those renewals result from the direct-response advertising being accounted for. In order to conclude that the renewals result from the direct-response advertising being accounted for, the renewals must not result from significant direct-response advertising that took place subsequent to the direct-response advertising being accounted for. ##### [944-30-25-1L](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1L) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:f18e5cf217953e9ef82701d62c3437070bcb699143649684e6150f4e98ae0bf1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Each significant advertising effort establishes a separate standalone cost pool. Examples of situations in which that required degree of reliability may exist, without significant direct-response advertising subsequent to the direct-response advertising being accounted for, include the following: 1. a The sale of subscriptions may be offered only through direct-response advertising. The entity may have objective evidence that, historically, a quantifiable percentage of subscriptions is renewed at the end of each subscription period without a significant advertising effort. After the subscription is purchased, in what is deemed to be an insignificant advertising effort, renewal subscriptions are offered for sale by mailing a renewal card to those who have subscriptions that will lapse soon. The amount of direct-response advertising reported as assets and amortized in future periods ordinarily would be based on the expected total revenue to be realized over both the initial and the renewal subscription periods. 2. b A series of products, such as pieces in a chess set, may be offered for sale only through direct-response advertising. After the first piece is purchased, the remaining pieces are offered for sale by mailing a response card to those who purchased the first piece in what is deemed to be an insignificant advertising effort. The entity may have objective evidence that, historically, each customer who buys the first piece will buy a quantifiable percentage of the remaining pieces. If each of the pieces is bought separately, the amount of direct-response advertising reported as assets and amortized in future periods ordinarily would be based on total revenue from all sales, including estimated future sales. If significant marketing efforts are required to generate subsequent revenues through renewal or repeat sales, those subsequent revenues would not qualify as revenues resulting from the direct-response advertising that resulted in the initial sale and initial standalone cost pool. For instance, in the chess set example in (b), if a pamphlet describing the chess set, its monetary and aesthetic value, and the history of the game of chess is sent to those who purchased the first piece, the amount of direct-response advertising reported as assets and amortized in future periods would be based on sales of the first piece rather than on the total of all sales including estimated future sales. However, subsequent direct-response advertising may result in the capitalization of the costs of that subsequent advertising, with its costs accumulated in a standalone cost pool, if the conditions for capitalization in this Subtopic are met. #### Acquisition Costs of Assets ##### [944-30-25-1M](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1M) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:3fa511e322fdce2db4cebfb37a521956594cf175d45016354188a57dd12b9cf0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The costs of materials bought from a supplier in the production of advertising materials shall be reported as costs of assets from direct-response advertising if those materials can be directly attributed to specific direct-response advertising. An example of such costs and activities is the cost of paper bought from a third party used to produce catalogues. #### Tangible Assets Used for Several Advertising Campaigns ##### [944-30-25-1N](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1N) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:0fde17555c7fac4df3d5846328a86c49909a0068bdac7febce1d4e6f110e1269 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Tangible assets, such as blimps or billboards, may be used for several advertising campaigns. The costs of such assets shall be capitalized. #### Revenues to Consider When Evaluating Future Benefits ##### [944-30-25-1O](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1O) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:cf4bd7ae48e5a66cb6e46017aa61014475785aa0d381c6a9ec9be54f5eaf0bc8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For purposes of considering the probable future benefits of direct-response advertising, revenues associated with such advertising are as follows: 1. a Primary: Revenues from sales to customers receiving and responding to the direct-response advertising 2. b Secondary: Revenues that are not from sales to customers receiving and responding to the direct-response advertising. For example, most publishers receive revenue from customers that subscribe to the publications; these subscription revenues are primary revenues. Publishers also receive secondary revenues such as advertisements in the publications (referred to as placement fees). Placement fee revenues are affected by several factors, including the total number of subscribers to the publication and the selling efforts devoted to obtaining the placement fees. ##### [944-30-25-1P](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1P) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:94db38fb7c70c1b284c7f5d8dd1c65b3ff1b480eff67f0c5842a9ce177d6c3e3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When determining probable future revenues, those revenues shall be limited to revenues from sales to customers receiving and responding to the direct-response advertising (primary revenues). When evaluating whether the direct-response advertising results in probable future benefits (see paragraph [944-30-25-1AA(b)](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1AA)), probable future benefits shall include only primary revenues. ##### [944-30-25-2](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:1810df56e57f4271200d8415a22a59a6d1ad8b17018be4ddd6ceb28aafa437ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [944-720-25-2](https://asc.understandingaccounting.org/asc/720/944/#720-944-25-2) requires that an insurance entity charge to expense as incurred certain other costs. ### Long-Duration Contracts ##### [944-30-25-3](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:1f83545cab4fbb5f02626496582f3874034a29d2ad51a23c01ece957876f21f6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance does not define the costs to be included in [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.") but does describe those that are not eligible to be capitalized. ##### [944-30-25-4](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:5399d34f89f4c05cd3f8eef70ddfd6ab688b1883e7af177228f7916f4e2342eb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Acquisition costs that have any of the following characteristics shall be considered maintenance and other period costs and be charged to expense in the period incurred: 1. a Acquisition costs that vary in a constant relationship to premiums or insurance [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 Acquisition costs that are recurring in nature 3. c Acquisition costs that tend to be incurred in a level amount from period to period. ##### [944-30-25-5](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:dd3f5ed9c0b94b6ff05063b8b07dbb89e3ee3312c9e405ff49fc837b4121693f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs such as recurring premium taxes and ultimate level commissions, which vary with premium revenue, shall be charged to expense in the periods incurred. #### Sales Inducements ##### [944-30-25-6](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:49439d67f019a958ae518f0c394bd50039675876593eec064833dab0be3e0e7f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [944-30-25-7](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-7) addresses [sales inducements](https://asc.understandingaccounting.org/glossary/s/#sales-inducements "Contractually obligated inducements that are identified explicitly in a contract and are in excess of current market conditions. A sales inducement to a contract holder enhances the investment yield to the contract holder. The three main types of sales inducements are an immediate bonus, a persistency bonus, and an enhanced-crediting-rate bonus.") that may be deferrable if the insurance entity can demonstrate that the sales inducement amounts have both of the following characteristics: 1. a The amounts are incremental to amounts the entity credits on similar contracts without sales inducements. 2. b The amounts are higher than the contract's expected ongoing crediting rates for periods after the inducement, as applicable; that is, the crediting rate excluding the inducement should be consistent with assumptions used in contract illustrations and interest-crediting strategies. Due to the nature of [day-one bonuses](https://asc.understandingaccounting.org/glossary/d/#day-one-bonus "See Immediate Bonus.") 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.") bonuses, the criteria in items (a) and (b) generally are met for such sales inducements. ##### [944-30-25-7](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:0f7c048f0a2c6a53f37cec3184cc9e45733c5f94ada83cb1ccb9b938f74d8bbc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Amounts specified in the preceding paragraph shall be deferred and amortized using the same methodology and assumptions used to amortize capitalized acquisition costs if the sales inducements have both of the following characteristics: 1. a The sales inducements are recognized as part of the liability under paragraph [944-40-25-12](https://asc.understandingaccounting.org/asc/944/40/#944-40-25-12). 2. b The sales inducements are explicitly identified in the contract at inception. #### Limited-Payment Contracts ##### [944-30-25-8](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:ea8e250c87f0c0731dedc3c687f16f465367d31282857d36405f09e5abbebf9c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs related to the acquisition of new and renewal business that are not capitalized (because they do not meet the criteria for capitalization in paragraphs [944-30-25-1A through 25-1AA](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1A)) and costs that are required to be charged to expense as incurred, such as those relating to investments, general administration, policy [maintenance costs](https://asc.understandingaccounting.org/glossary/m/#maintenance-costs "Costs associated with maintaining records relating to insurance contracts and with the processing of premium collections and commissions."), product development, market research, and general overhead (see paragraphs [944-40-30-15](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-15) and [944-720-25-2](https://asc.understandingaccounting.org/asc/720/944/#720-944-25-2)) are period costs that shall be recognized when incurred. Such costs shall not be included in the calculation of [net premium](https://asc.understandingaccounting.org/glossary/n/#net-premiums "For traditional and limited-payment long-duration insurance contracts, the net premium is that portion of the gross premium required to provide for all benefits and expenses, excluding acquisition costs or any costs that are required to be charged to expense as incurred. For long-duration participating life insurance contracts that meet the criteria in paragraph 944-20-15-3, the net premium is a constant ratio of guaranteed maximum gross premiums. The ratio is calculated at issue, so that the present value of all guaranteed death and endowment benefits is equal to the present value of all net premiums.") used in determining the profit to be deferred on [limited-payment contracts](https://asc.understandingaccounting.org/glossary/l/#limited-payment-contracts "Long-duration insurance contracts with terms that are fixed and guaranteed, and for which premiums are paid over a period shorter than the period over which benefits are provided. Limited-payment contracts subject the insurer to risks arising from policyholder mortality and morbidity over a period that extends beyond the period or periods in which premiums are collected.")because the inclusion of such costs in the calculation of net premium would result in their deferral. ##### [944-30-25-9](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-9) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:5a223801b9081e8f6bc152a46ea447bdeeed96200bad246fe1c3ebf03a0911f2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs that would be included in the determination of net premium under this Subtopic are policy-related costs that are not primarily related to the acquisition of business (such as termination or settlement costs; see paragraph [944-40-30-15](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-15)). ##### [944-30-25-10](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-10) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:38f3fa3eca5a1b721634362949c64a35a20c032b1375c66dda6811e7e3b7e5a3 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/). ### Internal Replacement Transactions ##### [944-30-25-11](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-11) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:de44b0f21d31031974c7510c1653c8f0927e230184c9eed5fee0aa9d91527b7d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance applies only to replacements of traditional life insurance contracts by universal life type contracts. If surrender of a life insurance contract is associated with an [internal replacement](https://asc.understandingaccounting.org/glossary/i/#internal-replacement "A modification in product benefits, features, rights, or coverages that occurs by a contract exchange; by amendment, endorsement, or rider to a contract; or by the election of a benefit, feature, right, or coverage within the contract.") by a universal life-type contract, the entity shall not defer either of the following in connection with the [replacement contract](https://asc.understandingaccounting.org/glossary/r/#replacement-contract "A new or modified contract in an internal replacement transaction."): 1. a Unamortized [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.") associated with the [replaced contract](https://asc.understandingaccounting.org/glossary/r/#replaced-contract "A contract that currently is held by the contract holder, and is exchanged or modified in an internal replacement transaction.") 2. b Any difference between the cash surrender value and the previously recorded liability. ##### [944-30-25-12](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-12) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:dc50000adfea428b5fef3f5159707eb5e405afd49efff257ac5982bb45b9d5cf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The accounting for other internal replacements shall be based on the circumstances of the transaction. ### Reinsurance Contracts ##### [944-30-25-13](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-13) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:8bdf66d8ab3a6abe0825fa0d79f2b1f0dff3ac6306acc8e124d06355e17f56c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The net cost to the assuming entity shall be accounted for as an [acquisition cost](https://asc.understandingaccounting.org/glossary/a/#acquisition-costs "Costs that are related directly to the successful acquisition of new or renewal insurance contracts."). ##### [944-30-25-14](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-14) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:02.838Z to 2026-09-10T02:16:02.838Z Record version: sha256:21aefb306689985c335e324725c79725805aa3f0ad7d8bf00f8aa1a1a6cd839a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [944-30-25-1A through 25-1B](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1A) provide guidance on recognition of acquisition costs.