# ASC 944-30-40: Financial Services—Insurance — Acquisition Costs — 40 Derecognition

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/944/30/#40-derecognition)

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## ASC 944-30-40: 40 Derecognition

[Read section](https://asc.understandingaccounting.org/asc/944/30/#40-derecognition)

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### Internal Replacement Transactions

#### Contracts That Are Substantially Changed

##### [944-30-40-1](https://asc.understandingaccounting.org/asc/944/30/#944-30-40-1)

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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.") that is determined under paragraph [944-30-35-37](https://asc.understandingaccounting.org/asc/944/30/#944-30-35-37) to result in a [replacement contract](https://asc.understandingaccounting.org/glossary/r/#replacement-contract "A new or modified contract in an internal replacement transaction.") that is substantially changed from 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.") shall be accounted for as an extinguishment of the replaced contract.

##### [944-30-40-2](https://asc.understandingaccounting.org/asc/944/30/#944-30-40-2)

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Unamortized 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."), unearned revenue liabilities, and deferred sales inducement assets from the replaced contract in an internal replacement transaction that results in a substantially changed contract shall not be deferred in connection with the replacement contract. If the replaced contract was acquired in a purchase business combination, any present value of future profits shall be accounted for in a similar manner.

##### [944-30-40-3](https://asc.understandingaccounting.org/asc/944/30/#944-30-40-3)

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Other balances associated with the replaced contract, such as any [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.") or [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."), shall be accounted for based on an extinguishment of the replaced contract and issuance of a new contract.

##### [944-30-40-4](https://asc.understandingaccounting.org/asc/944/30/#944-30-40-4)

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Acquisition costs related to the replacement contract shall be evaluated for deferral in accordance with Section 944-30-25.