# ASC 944-30-55: Financial Services—Insurance — Acquisition Costs — 55 Implementation Guidance and Illustrations Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/944/30/#55-implementation-guidance-and-illustrations) 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): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:934e5851f586653b11348c08e15c66406e5998601b2cc6345b1a932c841d026e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 944-30-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/944/30/#55-implementation-guidance-and-illustrations) SEC content: no #### Implementation Guidance ##### [944-30-55-1](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:243c9c43c5ea970fdb9339ce33a13e765c00755d04207737cea4e279580547b9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [944-30-25-1A(a)](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1A) requires that an insurance entity capitalize [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."). Such costs include the following: 1. a An agent or broker commission or bonus for successful contract acquisition or acquisitions. 2. b [Subparagraph superseded by Accounting Standards Update No. 2010-26](https://asc.understandingaccounting.org/updates/asu-2010-26/). 3. c Medical and inspection fees for successful contract acquisition or acquisitions. ##### [944-30-55-1A](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-1A) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:555f187bbde7de756767b6b9cbe67d29463e2f5602f89ab95e2529aa1795d1d4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples of other costs related directly to the insurer's acquisition activities in paragraph [944-30-25-1A(b)](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1A) that would not have been incurred by the insurance entity had the acquisition contract transaction(s) not occurred include all of the following: 1. a Reimbursement of costs for air travel, hotel accommodations, automobile mileage, and similar costs incurred by personnel relating to the specified activities 2. b Costs of itemized long-distance telephone calls related to contract underwriting 3. c Reimbursement for mileage and tolls to personnel involved in on-site reviews of individuals before the contract is executed. ##### [944-30-55-1B](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-1B) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:4c214665482ebd9f5c38ff9ee1406bf6756bc64f4052b05b8f8136fc02a221e7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs for software dedicated to contract acquisition are not eligible for deferral as 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.") under the definition of that term. Such costs are not other costs related to those activities that would not have been incurred but for that contract under the definition of that term. ##### [944-30-55-1C](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-1C) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:047c3fa078b8d063b278ac1f4b73edecd8bb180d8ae88860f1822d4271b6679d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Payroll-related fringe benefits include any costs incurred for employees as part of the total compensation and benefits program. Examples of such benefits include all of the following: 1. a Payroll taxes 2. b Dental and medical insurance 3. c Group life insurance 4. d Retirement plans 5. e 401(k) plans 6. f Stock compensation plans, such as stock options and stock appreciation rights 7. g Overtime meal allowances. ##### [944-30-55-1D](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-1D) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:1d5ec20fa89d736273caa891b72bffe083ace8ede2db65ed8ee0a31959e4001c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic does not specify how costs are to be determined but rather what costs must be deferred. In many instances, standard costing may be used to estimate the costs to be deferred in accordance with this Subtopic. For certain contracts, the cost of acquisition may be similar and standard costing may be appropriate for those contracts, while other contracts may be of such a nature that costs must be identified separately. Insurers may use any one or a combination of methods that will provide adequate information to report financial results in accordance with this Subtopic. Development of a standard costing system will require periodic analysis of variances and, if necessary, adjustment of standard costing estimates. Possible standard costing methods that may be used to measure costs applicable to transactions that have occurred include standard costs, actual costs, job process costs (for example, homogeneous policies), or job order costs (for example, specific contracts). ##### [944-30-55-1E](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-1E) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:b1b64f632514e7c67382a22835446deab12c1624f0b75188ba044ee9401e52af Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The successful-efforts accounting notion utilized at an entity-wide level may result in a standard costing system that does not accurately reflect the amount of costs that may be deferred and amortized under this Subtopic. Successful acquisition efforts can be determined as a percentage of each function (for example, application, underwriting, and medical and inspection) and may be based on the percentage, adjusted for idle time and time spent on activities for which the related costs cannot be deferred, of successful and unsuccessful efforts determined for each function. ##### [944-30-55-1F](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-1F) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:e6ee21608b07526bc65904ba809cbc3e7f879693ffdfb49b65cca226027d3775 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All other contract acquisition-related costs, including costs related to activities performed by the insurer for soliciting potential customers (except direct-response advertising capitalized in accordance with paragraph [944-30-25-1AA](https://asc.understandingaccounting.org/asc/944/30/#944-30-25-1AA)), market research, training, and administration, should be charged to expense as incurred. Employees' compensation and fringe benefits related to those activities, unsuccessful contract acquisition efforts, and idle time should be charged to expense as incurred. Administrative costs, rent, depreciation, and all other occupancy and equipment costs are considered indirect costs and should be charged to expense as incurred. ##### [944-30-55-1G](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-1G) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:443b29a0995ec5032ee80e2243243ac760b9df99f7e5ff90b49dbf84ecc4dcd1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The portion of total compensation of executive employees that relates directly to the time spent approving successful contracts may be deferred as acquisition costs under the definition of that term. For example, the amount of compensation allocable to time spent by members of a contract approval committee is a component of acquisition costs. ### Long-Duration Contracts #### Illustrations ##### [944-30-55-2](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:d4deacf38f037c597bca4f7c356301038d9e94487b841da97e3b43440aab517b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the tabular rollforward that an insurance entity should disclose in its financial statements to meet the requirements of paragraph [944-30-50-2B(a)](https://asc.understandingaccounting.org/asc/944/30/#944-30-50-2B). 1. a [Subparagraph superseded by Accounting Standards Update No. 2018-12](https://asc.understandingaccounting.org/updates/asu-2018-12/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2018-12](https://asc.understandingaccounting.org/updates/asu-2018-12/). - Note X: Deferred Acquisition Costs - The balances of and changes in 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.") as of and for the years ended December 31, 20X2, and December 31, 20X1, respectively, follow. - ![](https://asc.understandingaccounting.org/asc-img/GUID-EDA7E218-86A2-4582-BBBC-F92C926D0AC1-low.gif) "As of December 31, 20X2" Whole Life Universal Life Fixed Annuity Variable Annuity Variable Universal Life Total "Balance, beginning of year" $YYY $YYY $YYY $YYY $YYY $YYY Capitalizations XXX XXX XXX XXX XXX XXX Amortization expense (XXX) (XXX) (XXX) (XXX) (XXX) (XXX) Experience adjustment (XXX) (XXX) (XXX) (XXX) (XXX) (XXX) "Balance, end of year" $ZZZ $ZZZ $ZZZ $ZZZ $ZZZ $ZZZ "As of December 31, 20X1" Whole Life Universal Life Fixed Annuity Variable Annuity Variable Universal Life Total "Balance, beginning of year" $WWW $WWW $WWW $WWW $WWW $WWW Capitalizations XXX XXX XXX XXX XXX XXX Amortization expense (XXX) (XXX) (XXX) (XXX) (XXX) (XXX) Experience adjustment (XXX) (XXX) (XXX) (XXX) (XXX) (XXX) "Balance, end of year" $YYY $YYY $YYY $YYY $YYY $YYY ##### [944-30-55-3](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:e37dc93293571c81ef3721ba539a6ab582f1358d6555ea468c7523a4a3f7c682 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/). ##### [944-30-55-4](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:c88a12fb0965ead1f18d8b7bc6c92caee9673bc0e1a58c68d78995cbf287dcde 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/). ##### [944-30-55-5](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:90785e314042b25a8eb2110d13ee9b33a74d84351671419becabb8be5745d65e 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/). ##### [944-30-55-6](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:40c240b5534e83dee5f5ec614e98407d354cbdbfd639e52e2a5894c8c8b876b1 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/). ##### [944-30-55-7](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:fc0fae76c119702bd548b86f5b7e05666e74b12922133bdb11bb92d87c126fb4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the computation of amortization on a constant level basis. In this Example, a block of long-duration guaranteed-renewable five-year term life insurance contracts are grouped and amortized in proportion to the amount of 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.") to derive an approximate level amortization amount on an individual contract basis. In 20X1, the insurance entity defers costs totaling $80 and projects the balance of insurance in force over 5 years. The insurance entity would need to include mortality and lapse assumptions to project the balance of insurance in force; however, for ease of illustration, no mortality or lapses are assumed (see paragraph [944-30-55-7B](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-7B) for subsequent changes to the mortality and lapse assumptions). - ![](https://asc.understandingaccounting.org/asc-img/GUID-92F8565F-4193-4B28-9C8B-58BBCDEF6242-low.gif) Schedule One Year Balance of Insurance in Force 20X1 " $1,000 " 20X2 " 1,000 " 20X3 " 1,000 " 20X4 " 1,000 " 20X5 " 1,000 " Total " $5,000 " (x) Capitalized acquisition costs $80 (y) Amortization rate = (y) / (x) 1.60% (z) - ![](https://asc.understandingaccounting.org/asc-img/GUID-FF3CC961-CCF3-44F2-AF93-894BF6A7FCCE-low.gif) Schedule Two "Capitalized costs, year one" $80 "Amortization, year one" "Balance of insurance in force of $1,000 (from Schedule One) at rate (z) above" (16) "Balance, end of year one" $64 ##### [944-30-55-7A](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-7A) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:c2f36c3d780c788b546fc1edf1f1784ddbf6097c2e2e3f04952b55db5798bbf4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the beginning of 20X2, the entity incurs an additional $10 of deferrable acquisition costs and computes the amortization rate and expense for 20X2 as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-40584995-946D-4D01-BBEC-16411332B5FE-low.gif) Schedule Three Year Balance of Insurance in Force 20X2 " $1,000 " 20X3 " 1,000 " 20X4 " 1,000 " 20X5 " 1,000 " Total " $4,000 " (x) Capitalized acquisition costs $74 (y) Amortization rate = (y) / (x) 1.85% (z) ##### [944-30-55-7B](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-7B) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:d0bc86e4ce6f043d7a059875c4973b0b57fc34a4813af23a46a1b99ebd05272d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the end of 20X2, the entity experienced unexpected contract terminations that resulted in the writeoff of deferred acquisition costs at the end of the reporting period. In addition, the entity updated the expected balance of insurance in force for the remaining periods. - ![](https://asc.understandingaccounting.org/asc-img/GUID-DAEB00E2-7F83-49E1-835E-705ECB552371-low.gif) Schedule Four "Capitalized costs, year two" $74 "Amortization, year two" "Balance of insurance in force of $1,000 (from Schedule Three) at rate (z) above" (19) "Experience adjustment, end of year two" Change in balance of insurance in force "$55 × \[(1,000 - 700) / 1,000\]" (17) "Balance, end of year two" $38 - ![](https://asc.understandingaccounting.org/asc-img/GUID-09B368BE-E900-4FF6-8B86-64E51F8599C0-low.gif) Schedule Five Year Balance of Insurance in Force 20X3 $700 20X4 400 20X5 200 Total " $1,300 " (x) Capitalized acquisition costs $38 (y) Amortization rate = (y) / (x) 2.92% (z) - ![](https://asc.understandingaccounting.org/asc-img/GUID-36892719-FF4E-4ECE-91FF-6A0E6C6EE601-low.gif) Schedule Six "Capitalized costs, year three" $38 "Amortization, year three" Balance of insurance in force of $700 (from Schedule Five) at rate (z) above (20) "Balance, end of year three" $18 - ![](https://asc.understandingaccounting.org/asc-img/GUID-9B170E0F-1795-44D6-8D9A-0DF526296C9C-low.gif) Schedule Seven Deferred Acquisition Costs Rollforward Year "Balance, Beginning of Year" Capitalization Experience Adjustment Amortization "Balance, End of Year" 20X1 $- $80 $- $(16) $64 20X2 64 10 (17) (19) 38 20X3 38 - - (20) 18 20X4 18 - - (12) 6 20X5 6 - - (6) - Total $90 $(17) $(73) ##### [944-30-55-8](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:81afb106b56cd1f523e7039d2237c506f8505454decf18eecb1c753b0f505e3c 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/). ##### [944-30-55-9](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-9) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:6761b1dec2e22b1e03d239a9bc5d580fd3e12d138b2ccee0259bc7ea8aead042 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/). ##### [944-30-55-10](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-10) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:466ad60a17b409fc5134408617a5b9bb2cfae50637c05fb0ea39fc04046cb6ef 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 #### Implementation Guidance ##### [944-30-55-11](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-11) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:1ce792e0d10cfdeb388fb5b649c765b17aa603e726db850315474d57901a0278 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A flowchart summarizing the accounting model set out in the Internal Replacement Transactions Subsections of this Subtopic follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-9032F3BA-2C88-4C37-BB6C-9923CF17DE07-low.gif) #### Illustrations ##### [944-30-55-12](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-12) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:34b11e0c32ee392c8dc659a8101241eb84719c80c514c98753de45c7e6739805 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Example illustrates the application of the guidance in the Internal Replacement Transactions Subsections of this Subtopic to 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.") transaction that results in a substantially unchanged contract. 1. a [Subparagraph superseded by Accounting Standards Update No. 2018-12](https://asc.understandingaccounting.org/updates/asu-2018-12/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2018-12](https://asc.understandingaccounting.org/updates/asu-2018-12/). ##### [944-30-55-13](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-13) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:45d054044b19b06e35452d14e9149853abf5370e6cacd936201236f5d3c978cf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example assumes the following: 1. a An insurance entity is offering to replace its [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).") single premium deferred [annuity contracts](https://asc.understandingaccounting.org/glossary/a/#annuity-contract "A contract that provides fixed or variable periodic payments made from a stated or contingent date and continuing for a specified period, such as for a number of years or for life.") with newer general account single premium deferred annuity contracts. 2. b The insurance entity assumes that 50 percent of the [existing contract](https://asc.understandingaccounting.org/glossary/e/#existing-contract "A contract that is currently held by the contract holder and excludes nonintegrated contract features.") holders choose the internal replacement at the end of Year 5. 3. c No [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.") from 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.") will be imposed on contract holders who elect to have their contracts replaced. 4. d The contract holder who elects the new contract will receive a higher interest crediting rate than under the older contract but must accept a new surrender charge period. 5. e The insurance entity expects that [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.") rates will improve under the [replacement contracts](https://asc.understandingaccounting.org/glossary/r/#replacement-contract "A new or modified contract in an internal replacement transaction.") as a result of the new surrender charge period and the higher credited interest. ##### [944-30-55-14](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-14) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:4f803c9b36b6c234d8f636dff9eea4141c3cbf03567b92395e8cb90c6946b34d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The exchange of the single premium deferred annuity contract for a newer single premium deferred annuity contract in this Example results in the replacement contract being substantially unchanged 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."), due to the following: 1. a The insured event or risk, type, or period 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.") of the contract has not changed, as noted by no significant changes in the kind and degree of [mortality risk](https://asc.understandingaccounting.org/glossary/m/#mortality-risk "The obligation to make payments that are contingent upon the death or continued survival of a specific individual or group."), [morbidity](https://asc.understandingaccounting.org/glossary/m/#morbidity "The relative incidence of disability due to disease or physical impairment.") risk, or other [insurance risk](https://asc.understandingaccounting.org/glossary/i/#insurance-risk "The risk arising from uncertainties about both underwriting risk and timing risk. Actual or imputed investment returns are not an element of insurance risk. Insurance risk is fortuitous; the possibility of adverse events occurring is outside the control of the insured."), if any. 2. b The nature of the investment return rights, if any, have not changed. 3. c No additional deposit, premium, or charge relating to the original benefit, in excess of amounts contemplated in the original contract, is required to effect the transaction. 4. d Other than distributions to the contract holder or contract designee, there is no net reduction in the contract holder's account value or, for contracts not having an explicit or implicit account value, the cash surrender value, if any. 5. e There is no change in the participation or dividend features of the contract, if any. 6. f There is no change to the revenue classification of the contract. ##### [944-30-55-15](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-15) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:5e70ac9f4759906113f0b714e698d5b06c41095c60aebb4554f521bef9b467b9 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/). ##### [944-30-55-16](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-16) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:9dfb630761eed017ac079deb27e4580f806863e0f5dff9d065982be50ef98042 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/). ##### [944-30-55-17](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-17) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:2e4b9cd8a1d2684873d7cb70c32014936100e865b562750ddcf1572da6f01193 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/). ##### [944-30-55-18](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-18) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:9455579f1f8ee0c304c8bfa12b5400b7396c1eb6ac5b73c25b9dae6b491b0305 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/). ##### [944-30-55-19](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-19) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:6a5abbfccf1093d3270c59aa0136872e434108c2c1944bbb48e45712fd4f117a 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/). ##### [944-30-55-20](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-20) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:14722c9aaf917c1d63d92ed54e645d64ef6798b4ddc2112bdf5798391224595d 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/). ##### [944-30-55-21](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-21) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:619b6b71760c777f272504b8bcddf863523a89e6a4b47e0f4c275a9e63369ac6 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/). ##### [944-30-55-22](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-22) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:5784977f233e9add9175efda6a8d6169f40251400a95fb54491eb7ff2f96c660 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/). ##### [944-30-55-23](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-23) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:9e402ff924f1a378f319155091e32c7186b8c678e638dd5da7452f59206d52a3 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/). ##### [944-30-55-24](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-24) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:7cdeb4ba207f3ab9e603eb0f1cd24012bba6b39c7f1360c71032db5d6651f67b 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/). ##### [944-30-55-25](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-25) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:bb7b585a1a65741308d76fe76513e94311f6cf21c190eb7e7ac86c514ee1bf99 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/). ##### [944-30-55-26](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-26) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:0e5c53b9fe5d4bcd5eb5c4433a4ff5fcf78dc6b97aa7cb46ca973255ffcdcb8a 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/). ##### [944-30-55-27](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-27) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:da973a15d6a01b62e74bb5962d006bbf81b4ca8d759af6beb0d2413d070a9f29 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/). ##### [944-30-55-28](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-28) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:cd78fc31156ae03482bb179d91b81354c7ca1471e1ff2826effa7f8e4c03c7d6 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/). ##### [944-30-55-29](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-29) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:e3375841bccd4c01c4233c04f230a515b99efb1fec49c405c200515753c720be 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/). ##### [944-30-55-30](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-30) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:8fb52829941bf74a6b3d69b8da69dcac4e573b2350837bb8a01950cf28935a89 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/). ##### [944-30-55-31](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-31) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:b57b10c638164443d40b8e2c8c89328c2172a8b22471d0a0a3b3f1d0f31015c6 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/). ##### [944-30-55-32](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-32) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:55a75bbcd82ff4ac31b249bb9b9d164624d0695f0603e40fc009f3c5401c0503 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/). ##### [944-30-55-33](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-33) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:6cff413ef0f2a576e7b6d4f93db9aeb9cad56fbafd23e13143e58d36938fcaf9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following represents implementation guidance for contract modifications and the application of the guidance in Section 944-30-35 for evaluating whether the internal replacements are substantially changed from the replaced contracts. The guidance is based on the specific facts and circumstances; the same conclusions may not be reached for other modifications because of differing facts or circumstances. The following cases represent contract modifications. ##### [944-30-55-34](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-34) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:65d7f593963556e5ea47bf0fe41bc008639180fb2b83c620bae1fe59cf75d1ff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. There are several ways in which a contract holder can increase death benefit coverage on a traditional whole life insurance contract. ##### [944-30-55-35](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-35) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:cc07973e0aecd527e5d999b339ad51db1e2d30d5eb816ead09e043099461a3dc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An option to purchase additional insurance rider gives the contract holder the right to purchase additional insurance coverage with no additional underwriting. That is, the contract holder can increase the face value of the policy for the same type of insurance coverage and in the same form as that provided by the original contract. The additional premium charged is not in excess of an amount that would be commensurate with the additional insurance coverage obtained. The rider could be included in the original contract or added subsequently to its issuance. This is an example of a nonintegrated contract feature. Once purchased, the benefit under the option to purchase additional insurance rider generally is accounted for as a separate contract. ##### [944-30-55-36](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-36) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:b7ebf069987fbe0c2d217d01535684feaabe08ad80d8d827856f4d5b45c837ba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The contract holder obtains a second life insurance policy for an incremental face amount, with underwriting required on the new policy only. The original contract remains in force without change. This transaction does not fall within the definition of an internal replacement in Section 944-30-35. The accounting for the original contract remains unchanged and the new contract is accounted for independently of the original contract. Any deferrable [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 new contract are deferred and amortized in accordance with the guidance in Section 944-30-35, as applicable. ##### [944-30-55-37](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-37) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:b6ca726041f957e95aece05aa3688e654e15064afe4dfe04904b03ba2d337316 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The increased face amount (death benefit) of a traditional life insurance contract effectuated through an amendment or rider to the original contract is considered a nonintegrated feature that should be accounted for separately from the existing life insurance contract, provided that the additional premium charged for that incremental insurance coverage is not in excess of an amount that is commensurate with the incremental insurance coverage and does not result in the explicit or implicit reunderwriting or repricing of other components of the contract. ##### [944-30-55-38](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-38) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:2b2aa715dc1823aa460c4fe938e82983ddd4ad08cbda910960e0d8056e33fc1f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Universal life-type contracts are long-duration contracts that can provide either death or annuity benefits and are characterized by one of the following features: 1. a One or more of the amounts assessed by the insurer against the policyholder are not fixed and guaranteed by the terms of the contract. 2. b Amounts that accrue to the benefit of the policyholder are not fixed and guaranteed by the terms of the contract. 3. c Premiums may be varied by the policyholder within contract limits without the consent of the insurer. ##### [944-30-55-39](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-39) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:a30b2f5bdb7a5ce580ac120e8cd21899ce244feeab3a77343ed0e504527b60ba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The increase in face amount of a universal life-type contract through an amendment to the original contract is considered an integrated feature as the death benefit under a universal life-type contract is equal to the excess of face amount over contract account value. In this example, only the additional face amount has been underwritten during the contract amendment and the additional premium charged is not in excess of an amount that would be commensurate with the additional insurance coverage obtained. This contract amendment to increase the face amount of a universal life-type contract results in the replacement contract being substantially unchanged from the replaced contract due to the following: 1. a The modification does not result in a change in the insured event, as there is no significant change in the kind and degree of mortality risk. Although the face amount of the contract has increased, it is appropriate in this example to analyze the change in degree of mortality risk by comparing the relationship of the expected cost of the benefit to charges assessed for that benefit, and there was no significant change in this relationship. 2. b There is no change in the nature of the investment return rights from the replaced contract. 3. c There are no changes in the charges related to the original benefits; also, the additional [cost of insurance](https://asc.understandingaccounting.org/glossary/c/#cost-of-insurance "Amounts expected to be assessed for mortality.") is not in excess of an amount commensurate with the additional insurance coverage obtained. 4. d There is no net decrease in the balance available to the contract holder, except to pay the cost of insurance charge for the increased coverage. 5. e There is no change in the participation or dividend feature of the replaced contract. 6. f The modification does not result in a change to either the amortization method or revenue classification of the contract. ##### [944-30-55-40](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-40) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:bd65a4c0e272759b60536eb67f17b229e1407a11b176cfae4986ce3b91a6a2fd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A universal-life type contract may contain a no-lapse guarantee feature that provides for continuing coverage of the contract even if the account value drops to a level that cannot cover the contract charges. The [contract exchange](https://asc.understandingaccounting.org/glossary/c/#contract-exchange "The legal extinguishment of one contract and the issuance of another.") of a universal life-type contract for a universal life-type contract that contains a no-lapse guarantee results in the replacement contract being substantially changed from the replaced contract because the addition of the no-lapse guarantee changes both the period of coverage of the contract as well as introduces a combination of mortality and investment risk. The analysis would be the same if the change had been achieved through the addition of a no-lapse guarantee rider, as it would be considered an integrated benefit (the benefit is a function of the contract account value) and would need to meet the conditions of paragraph [944-30-35-37](https://asc.understandingaccounting.org/asc/944/30/#944-30-35-37). If, however, the contract holder had elected to add a no-lapse guarantee feature that was included in the original contract (and met the specifications of paragraphs [944-30-35-26 through 35-28](https://asc.understandingaccounting.org/asc/944/30/#944-30-35-26) ), the modification would not be considered an internal replacement. ##### [944-30-55-41](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-41) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:aea212a6c70792f7ef2de9f13387ed40db5f6b29cf2e7fb6143f4d133b85e6fd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A second-to-die feature incorporates multiple mortality events within a single contract, as payment to the beneficiary is made, assuming the contract remains in force, only after both insured individuals die. The contract exchange of a universal life-type contract for a universal life-type contract that contains a second-to-die provision results in the replacement contract being substantially changed from the replaced contract because the addition of the second-to-die feature changes the insured event, as now two mortality events must occur for the beneficiary to obtain the proceeds. If the modification were achieved through amendment, endorsement, or rider rather than through a contract exchange, the analysis and conclusion would be the same as for the contract exchange because the second-to-die provision is an integrated feature. ##### [944-30-55-42](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-42) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:c8596dcc32b2c9b9d01f17c6ca4a2925b0450bfd198d3293b0e97c92e09acb81 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An automobile insurance contract is a short-duration contract that generally provides coverage for personal injury and automobile damage sustained by the insured and liability to third parties for losses caused by the insured. A newly purchased car being added to an existing automobile policy with no change in the other vehicles covered or the premium related to the other vehicles under the contract results in additional nonintegrated contract coverage that should be accounted for separately from the existing automobile contract coverage, assuming the underwriting and price for coverage of the new car is determined separately and there is no change, explicit or implicit, in the pricing of the base contract. ##### [944-30-55-43](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-43) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:33cb3c36ca0f5086457e3d9d6a55bdb4c6e349a2031817c55c5cbf43e614331d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If one of the existing automobiles under the contract described in paragraph [944-30-55-42](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-42) above is removed from the automobile contract, it is considered the extinguishment of nonintegrated contract coverage and should be accounted for as an extinguishment of only the balances related to that nonintegrated coverage. The amount refunded to the contract holder from the change in the coverage is determined in accordance with terms that are fixed in the contract or applicable state law or regulation, and no reunderwriting is required for other coverage. The amount refunded to the contract holder reduces the related unearned revenue liability, and unamortized deferred acquisition costs related to the extinguished nonintegrated contract coverage are eliminated. ##### [944-30-55-44](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-44) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:87253ad85acc36f0808685c948c89056f6bf2359fa2e6bb4c0ac9afe28f18e8e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Assume the automobile insurance contract described in paragraph [944-30-55-42](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-42) contains one car and one driver, the existing car is sold and replaced with another car, and coverage is changed through a contract endorsement. For accounting purposes, the original automobile contract is extinguished and coverage for a new automobile contract is established for the driver and the new car. The modification is not a reduction in coverage under paragraph [944-30-35-29](https://asc.understandingaccounting.org/asc/944/30/#944-30-35-29), as it is a termination of all coverage in the contract, not a partial termination of coverage as described in paragraph [944-30-35-29](https://asc.understandingaccounting.org/asc/944/30/#944-30-35-29). It is common practice to net settle the premium and commission adjustments resulting from this contract modification. For accounting purposes, there are in substance two transactions: the extinguishment of one contract, which is accounted for as a contract extinguishment under paragraphs [944-30-40-1 through 40-4](https://asc.understandingaccounting.org/asc/944/30/#944-30-40-1) , and establishment of a new contract. ##### [944-30-55-45](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-45) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:78d2d0cf6fca24f2ff1806403af328b0f58c44e342a9f9261fad8a199208c7f3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The addition of a new driver to an existing automobile contract with no other changes in the contract results in additional nonintegrated contract coverage that should be accounted for separately from the existing automobile contract coverage, as the underwriting and price for coverage for the new driver is determined separately. ##### [944-30-55-46](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-46) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:d7f9566c1c24c3b1cf5ba57c0433e412d0be146f755b1bdfbe68ad25d8bbe521 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If one of the existing drivers under the contract described in paragraph [944-30-55-44](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-44) is removed from the automobile contract, it is the extinguishment of nonintegrated contract coverage and should be accounted for as an extinguishment of only the balances related to that nonintegrated coverage. The amount refunded to the contract holder from the change in the coverage is determined in accordance with terms that are fixed in the contract or applicable state law or regulation, and no reunderwriting is required for other coverage. The amount refunded to the contract holder reduces the related unearned revenue liability, and the balance of the unamortized deferred acquisition costs related to the extinguished nonintegrated contract coverage is eliminated. ##### [944-30-55-47](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-47) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:b7d3e4ee6461b33bbaed40c1d92f1ec4405fc74965c90db0021adcccfb325728 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An increase in the collision deductible of an automobile contract is, in effect, a reduction in the coverage provided. It is not an internal replacement, but a reduction in coverage under paragraph [944-30-35-29](https://asc.understandingaccounting.org/asc/944/30/#944-30-35-29), providing that all the terms that determine the amount refunded from the change in coverage are fixed in the original contract or by applicable state law or regulation and no reunderwriting is required for the continuing coverage. Contractual provisions that allow the contract holder to elect to decrease existing coverage at then-current rates (other than when required by state law or regulation), subject to a stated minimum and maximum, generally are not specific enough to satisfy this requirement. ##### [944-30-55-48](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-48) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:3cf826484dfb60a858aff0aadd086ec6e7213faed27b7b25527456bc06075286 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A decrease in the collision deductible of an automobile contract is, in effect, an increase in the coverage provided. It is not an internal replacement, but an election by the contract holder of coverage that was within the original contract as noted in paragraphs [944-30-35-26 through 35-28](https://asc.understandingaccounting.org/asc/944/30/#944-30-35-26) , providing that all the terms that determine the amount of the premium related to the additional coverage are fixed in the original contract or by applicable state law or regulation and no reunderwriting is required of the original coverage. Contractual provisions that allow the contract holder to elect to add future coverage at then-current rates (other than when required by state law or regulation), subject to a stated minimum and maximum, generally are not specific enough to satisfy this requirement. ##### [944-30-55-49](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-49) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:238a27ecfdd36e6e587f4222e80109c3efed52f0236dfdb16866e2d3f25dc7b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A homeowner's contract is a short-duration contract that generally provides coverage for loss or damage of property and personal injury occurring on the insured's property. A personal articles floater provides coverage for losses on personal property not covered under the terms of the homeowner's contract. If multiple pieces of jewelry are added to a personal articles floater, each separately identified and priced item constitutes a nonintegrated contract feature. Thus, the addition of a personal articles floater providing coverage for several new pieces of jewelry to an existing homeowner's contract, with no other changes in the contract, results in additional nonintegrated contract coverage that should be accounted for separately from the existing homeowner's contract, as the underwriting and price for coverage for the jewelry is determined separately from the homeowner's contract and does not result in the reunderwriting of the existing coverages provided by the contracts. This is true even though the items covered by the personal articles floater and the homeowner's contract share a deductible and limit in the event of a common loss. The sharing of a common deductible and limit in the event of loss does not determine whether the contract feature or coverage is integrated, as the deductible is a definition of the terms of coverage resulting from a single loss event. ##### [944-30-55-50](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-50) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:47a2b390f36c6c65435fc9deb466702923b4c2d7150452c98ac565788487cf30 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A contract holder increases the coverage of a homeowner's contract, which insures a house valued at $350,000 with $300,000 of insurance coverage, to $400,000 to include a recently completed addition to the house worth $100,000. The additional layer of coverage results in a nonintegrated contract feature that should be accounted for separately from the existing homeowner's contract, provided that the additional premium charged for that incremental insurance coverage is not in excess of an amount that is commensurate with the incremental insurance coverage and does not result in the explicit or implicit reunderwriting or repricing of other components of the contract. If, however, there was substantive underwriting of the entire contract, including the original coverage, the contract would be considered to be substantially changed because substantive reunderwriting of existing contract coverage is an indicator that the insurance risk has changed significantly, and would probably also result in the repricing of the entire contract, which would result in failure to satisfy the criteria in paragraph [944-30-35-37](https://asc.understandingaccounting.org/asc/944/30/#944-30-35-37). Additional coverage provided by a nonintegrated contract feature is considered nonintegrated even though the entire coverage provided by the contract is subject to a common deductible and limit in the event of an insured loss. ##### [944-30-55-51](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-51) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:55d20cdcdb0c34cdb7dd01fa041cfbfbe8fc99da649aeeb15d9b8ad4fcead04a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A contract holder currently has an umbrella contract from the same insurance entity as his or her homeowner's contract that provides for liability coverage with a limit of $1 million. The contract holder requests to increase the limit on the umbrella contract to $2 million. This additional layer of coverage results in additional nonintegrated contract coverage that should be accounted for separately from the existing umbrella contract, as the additional premium charged is not in excess of an amount that would be commensurate with the additional insurance coverage obtained ($1 million in excess of $1 million with no additional deductible), and there was no reunderwriting of the original coverage. If, however, there was substantive underwriting of the entire contract, including the original coverage, the contract would be considered to be substantially changed because substantive reunderwriting of existing contract coverage is an indicator that the insurance risk has changed significantly. ##### [944-30-55-52](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-52) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:bb32fbf55b49a57bbe14c79e233ffda5431631a3228576a81d268524816df6a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A long-term care product provides for a specified payment while the insured qualifies for benefits under the contract; for example, while in a long-term care facility or when receiving care at home. If the long-term care product had an authorized rate increase, the insurance entity may offer the contract holder the option of reducing coverage instead of paying additional premiums (i.e., maintain the current premium rate). For example, if the original contract provided benefit coverage of $100 a day for a $2,000 annual premium and there was an authorized increase of premiums to $2,500, the contract holder could elect to pay the increased premium or, if allowed by the insurance contract, retain annual premiums of $2,000 with reduced benefit coverage of $80 a day. In this example, the increase in premiums from $2,000 to $2,500 is related to a change in the cost of the insurance that is within ranges outlined in the contract and approved by the insurance regulator, and by itself the premium increase is not considered a modification to the contract. The contract holder election of a reduction in benefits is not an internal replacement, but rather a reduction in coverage under paragraph [944-30-35-29](https://asc.understandingaccounting.org/asc/944/30/#944-30-35-29), if all the terms for a change in coverage are fixed in the original contract or by applicable state law or regulation and no reunderwriting of the continuing coverage is required. ##### [944-30-55-53](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-53) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:524b144cf2505697e635a8ed83a7bc391e147757f123ef0e2225c2f7596496b8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the contract holder elected a reduction in benefits under which the terms related to a change in coverage were not fixed in the original contract, the contract modification results in the replacement contract being substantially unchanged from the replaced contract as a result of the following: 1. a The insured event has not changed from the replaced contract. 2. b The exchange does not change the nature of the contract holder's investment return rights. 3. c No additional deposit or premium is required and there are no changes in the charges related to the original benefits in excess of the amounts specified or allowed in the original contract, as the reduction in benefits is not in excess of the corresponding reduction in premiums. (The original contract provided for benefits of $100 a day for $2,000 annual premium, the reduction in benefits to $80 a day is commensurate with the 20-percent reduction in premiums from the increased rate of $2,500 to $2,000.) 4. d There is no net decrease in the balance available to the contract holder. 5. e There is no change in the participation or dividend features of the replaced contract. 6. f There is no change in the amortization method or revenue classification of the replaced contract. ##### [944-30-55-54](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-54) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:dcf37a8fc20411ec25ad1a05c7d7ea8b91c1adbcccd3c0bb172421670bd13c66 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A [single premium deferred annuity](https://asc.understandingaccounting.org/glossary/s/#single-premium-deferred-annuity "A general account fixed deferred annuity with a single premium and guaranteed minimum crediting rate. The crediting rate may vary above the minimum guaranteed rate at the discretion of the insurance entity and typically is declared in advance and set for a defined period (for example, one year or three years), often as a result of a selection made by the contract holder.") typically is classified as an investment contract as addressed in paragraphs [944-20-15-16 through 15-25](https://asc.understandingaccounting.org/asc/944/20/#944-20-15-16) . ##### [944-30-55-55](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-55) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:74743b143f720a7e774460d9be826389548adc9b96404628e162d27426b7c138 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The current interest rate guarantee period of a [market value annuity](https://asc.understandingaccounting.org/glossary/m/#market-value-annuity "An annuity that provides for a return of principal plus a fixed rate of return (that is, book value) if held to maturity or, alternatively, a market-adjusted value if surrendered before maturity.") typically does not encompass substantially all of the expected life of the contract. At the end of an interest rate declaration period, a new crediting rate is declared by the insurance entity and may vary above the minimum guaranteed rate. The length of the initial and subsequent interest rate guarantee periods generally is selected by the contract holder. Market value annuities typically are classified as investment contracts. ##### [944-30-55-56](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-56) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:3190712b7be2b2c0d53047cef91e5d3710fb47425e261a39e220468d47113e38 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In this guidance, there is no significant difference in the declared interest crediting rate (further, the change in interest rates is consistent with the change in declaration period), no change in the guaranteed minimum interest rate, no additional deposit or premium is required, and there are no surrender charges or [front-end fees](https://asc.understandingaccounting.org/glossary/f/#front-end-fees "See Initiation or Front-End Fees.") associated with the internal replacement. The contract exchange of a single premium deferred annuity contract for a market value annuity contract results in the replacement contract being substantially unchanged from the replaced contract as a result of the following: 1. a The insured event has not changed from the replaced contract. 2. b The exchange does not change the nature of the contract holder's investment return rights (crediting rate declared by insurance entity, subject to guaranteed minimum crediting rate). The single premium deferred annuity and the market value annuity are both contracts for which the interest rate is periodically reset by the insurance entity subject to a minimum interest rate guaranteed by the contract and, in this example, the current declared interest period does not represent substantially all of the expected life of the contract. The difference between the single premium deferred annuity and the market value annuity results from the manner in which the amount available to the contract holder is determined in the event the contract is terminated prematurely, not the contractual rights and provisions for the determination of the contract holder's investment return in the absence of a premature termination of the contract. 3. c No additional deposit or premium is required, and there are no changes in the charges related to the original benefits. 4. d There is no net decrease in the balance available to the contract holder. 5. e There is no change in the participation or dividend features of the replaced contract. 6. f There is no change in the amortization method or revenue classification of the replaced contract. ##### [944-30-55-57](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-57) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:218f57e4aa783d64e2e66d5704d3c0ba1a3dd4af6945c81601b9c8cfb3fa8d96 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The single premium deferred annuity and the market value annuity are both contracts for which the interest rate is periodically reset by the insurer subject to a minimum interest rate guaranteed by the contract; the only significant substantive difference between these two contracts is the manner in which amounts are determined in the event of a premature surrender. If the declared interest rate period of the market value annuity constituted substantially all of the expected life of the contract, the change from a contract for which interest is set at the discretion of the insurer to one for which the rate is set by contract would result in a substantially changed contract. ##### [944-30-55-58](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-58) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:02511d2e8440f11d5fbba4f6df173fd597ea05395bc7663385ce492a9f3eee50 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A single premium deferred annuity has a crediting rate that is set at the discretion of the insurance entity. An equity-indexed annuity is a deferred fixed annuity contract with a guaranteed minimum crediting rate plus a contingent return based on a contractually specified internal or external equity index. Equity-indexed annuities typically are classified as investment contracts with embedded derivatives that are required to be bifurcated from the contract and accounted for separately under Topic 815 (see paragraphs [815-15-55-62 through 55-72](https://asc.understandingaccounting.org/asc/815/15/#815-15-55-62) ). Generally, the equity index feature represents a periodic crediting rate mechanism that affects the amounts credited to the contract holder's account balance, rather than representing a benefit in addition to the account balance that protects the contract holder from other-than-nominal capital market risk and exposes the insurance entity to other-than-nominal capital market risk. Periodic crediting rate mechanisms are required to be evaluated for possible bifurcation under Topic 815. However, an equity-indexed annuity also may contain one or more [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.") (see paragraphs [944-40-55-29A through 55-29D](https://asc.understandingaccounting.org/asc/944/40/#944-40-55-29A) ). ##### [944-30-55-59](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-59) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:06f3a642622937b2f657bf5bf736496423173ab7ee750e4ff52a37b7c45f9409 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The contract exchange of a single premium deferred annuity contract for an equity-indexed annuity results in the replacement contract being substantially changed from the replaced contract because the nature of the contract holder's investment return rights differs significantly between the two contracts. The crediting rate of the single premium deferred annuity contract is declared at the discretion of the insurance entity, while the crediting rate on the equity-indexed annuity is contractually determined by reference to a pool of assets, an index, or other specified formula. ##### [944-30-55-60](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-60) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:4dc1e5447079afa64a22f345a788d0dba0b27235fe43e3359ccf0a182304994c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A single premium deferred annuity has a crediting rate that is set at the discretion of the insurance entity. A multi-bucket annuity is a general account deferred annuity for which, subject to a contractually specified minimum crediting rate, the interest rate to be credited on the contract holder's account balance is determined based on the returns achieved on a specified category of investments or investment strategy selected by the contract holder. The contract specifies the rights and provisions for the determination of investment return to the contract holder. ##### [944-30-55-61](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-61) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:60061fd547443a76d1a4816deec3a56d5788eebdbc08785f9bb0e59bceb62307 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The contract exchange of a single premium deferred annuity contract for a multi-bucket annuity results in the replacement contract being substantially changed from the replaced contract because the nature of the investment return rights are different between the two contracts. In the case of the typical single premium deferred annuity, the interest rate is declared at the discretion of the insurance entity whereas, in the case of the multi-bucket annuity, the interest rate is determined by reference to a specific category of assets or investment strategy selected by the contract holder as defined in the contract. ##### [944-30-55-62](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-62) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:bd31100eef365ae452d3af81f076d1d0b48d1e5c2e7ace35af2bfe6a049e25f2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A fixed-interest rate guaranteed investment contract has a stated fixed crediting rate guaranteed for a specified period. An example of a variable-interest rate guaranteed investment contract is a contract with a credited interest rate defined as London Inter Bank Offered Rate (LIBOR) plus a specified spread. Both types of guaranteed investment contracts are classified investment contracts under paragraphs [944-20-15-16 through 15-25](https://asc.understandingaccounting.org/asc/944/20/#944-20-15-16) . ##### [944-30-55-63](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-63) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:fc3ebeabfb71b65701703f3ad8ca07c63b6ed3f29bd718aebe1f73ff614e3e02 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The contract exchange of a fixed-rate guaranteed investment contract for a variable-rate guaranteed investment contract results in the replacement contract being substantially changed from the replaced contract because the investment return rights for the determination of the contract holder's investment return are different between the two contracts. In the case of the fixed-rate guaranteed investment contract, the interest rate is fixed and guaranteed whereas, in the case of the variable-interest rate guaranteed investment contract, the investment return to the contract holder is contractually specified to be determined based on the returns achieved on a specified category of investments or tied to a specific index. ##### [944-30-55-64](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-64) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:3903a2e45a2e93cea21fc6853032116bc090fb6a3b02db89eb141a1a7bbc9c1f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A variable annuity is a product offered by an insurance entity in which the contract holder's payments are used to purchase units of a [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."). The contract holder directs the allocation of the account value among various investment allocation alternatives and bears the investment risk. The units may be surrendered for their current value in cash (often less a surrender charge) or applied to purchase annuity income contracts. The insurance entity periodically deducts mortality and expense charges from the account. A common feature in variable annuities is a [minimum guaranteed death benefit](https://asc.understandingaccounting.org/glossary/m/#minimum-guaranteed-death-benefit "A feature in an annuity, life insurance, or similar contract that provides that in the event of an insured's death, the beneficiary (or insurer in the case of a reinsurance contract) will receive the higher of the current account balance of the contract or another amount defined in the contract."), with some minimum guaranteed death benefit designs providing more extensive benefits than others. ##### [944-30-55-65](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-65) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:5f7d5ca149734ebbf5cc402aa6e4d5a0d4c8379e0a24d80ebbf2e86c7044887c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The contract exchange of a variable annuity with a return of premium death benefit guarantee, that in this example is determined to have a minimal degree of mortality risk (although sufficient to result in classification as an insurance contract), for a variable annuity that contains a ratchet death benefit guarantee, that in this example is determined to be a "rich" death benefit, results in the replacement contract being substantially changed from the replaced contract as the change in death benefits substantively changes the degree of mortality risk. The nature of a minimum guaranteed death benefit provision is essentially a combination of mortality and investment events. Although the actual mortality event itself is the same in the return of premium and ratchet guaranteed minimum death benefits (death of the contract holder), the risk has changed because of the combined effects of mortality and investment events. In this instance, the preparer analyzed and concluded that a significant change in the actuarially determined expected mortality costs was indicative of a significant change in the degree of mortality risk. It should be noted that other methods and approaches could have been used to evaluate the change in degree of mortality. ##### [944-30-55-66](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-66) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:6ce36c66b7e2b29f139d5ab0699c0c3d55808b16bec0fd3c52edb8ed56d24be1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In this guidance, it is assumed that both the variable annuity with the rollup death benefit guarantee and the variable annuity with the ratchet death benefit guarantee offered as an internal replacement are determined to have similar degrees of mortality risk. In this instance, the preparer compared actuarially determined expected mortality costs, and since the costs were similar, it was indicative that the degree of mortality risk was also similar. It should be noted that other methods and approaches could have been used to evaluate the change in degree of mortality. It is also assumed that there is no reunderwriting required for the transaction, no additional deposit required to effect the transaction, and no net decrease in the balance available to the contract holder prior to surrender charges. In this guidance, the replacement results in additional mortality and expense charges due to the enhanced death benefit guarantee not in excess of an amount commensurate with the added benefit. A contract exchange of a variable annuity contract that contains a minimum guaranteed death benefit that is determined to have significant mortality risk with a variable annuity contract that contains another kind of minimum guaranteed death benefit that is determined to have a comparable degree of mortality risk, results in the replacement contract being substantially unchanged from the replaced contract as a result of the following: 1. a The exchange does not result in a significant change in the kind and degree of mortality risk. 2. b The exchange does not change the nature of the contract holder's investment return rights. 3. c No additional deposit or premium is required relating to the variable annuity (the original benefit), and the additional charges for the ratchet death benefit guarantee are not in excess of an amount commensurate with the benefit. 4. d There is no net decrease in the balance available to the contract holder. 5. e There is no change in the participation or dividend features of the contracts. 6. f There is no change to the revenue classification of the replaced contract. ##### [944-30-55-67](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-67) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:19e0d21aef46afe538d5cb44e7ebffd783a450ad16923c939093db064a999004 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the modification were achieved through amendment, endorsement, or rider rather than through a contract exchange, the analysis and conclusion would be the same as for the contract exchange because the minimum guaranteed death benefit is an integrated feature. ##### [944-30-55-68](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-68) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:fbc7ba37c19008289ca24f1bd970deada214a8e252488e8186bf891a18aede7c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A long-term care rider provides that in the event the insured enters a covered facility, the feature will provide a specified fixed payment while the insured is being treated at a covered facility. ##### [944-30-55-69](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-69) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:b5aeab99d4d8bf7e99f1a03f9884a39f47acda9ad99fb3b39948360c756dbdf1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In this guidance, the contract holder exchanges the original variable annuity contract for a new variable annuity contract that contains an long-term care rider. This is a contract exchange in which the replacement contract contains a nonintegrated contract feature, as the long-term care rider is not related to the provisions of the replacement variable annuity contract. This contract exchange results in the base annuity contract being substantially unchanged from the replaced contract as a result of the following: 1. a The modification does not result in a change in the insured event, as there is no significant change in the kind and degree of mortality risk from the replaced contract. 2. b There is no change in the nature of the investment return rights from the replaced contract. 3. c There are no changes in the charges related to the variable annuity (the original benefit), and the additional premium for the long-term care benefit is not in excess of an amount commensurate with the additional insurance coverage obtained. 4. d There is no net decrease in the balance available to the contract holder. 5. e There is no change in the participation or dividend features of the replaced contract. 6. f The modification does not result in a change to either the amortization method or revenue classification of the contract. ##### [944-30-55-70](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-70) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:ae918310c42e2fc7257a8c562987b9a299b06303ff566978060f02097511db41 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The long-term care rider should be accounted for as a separate contract, as it is a nonintegrated contract feature. This accounting would be the same if the modification had been achieved through the addition of a long-term care rider to the original annuity contract rather than through an exchange. ##### [944-30-55-71](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-71) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:d59fe030ab910c5c22eab68061b78d99c1b048afb49ec34d4dd8603754110fa8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Variable annuities generally have a number of investment allocation alternatives from which the contract holder may select. In the normal course of business, companies modify these elections for a number of reasons, including competition and changes in investment management and distribution relationships. Throughout the life of the contract, the contract holder has the option to select new allocations for the investment of his or her annuity account balance. Generally, the addition of new investment allocation alternatives to variable life insurance or annuity contracts does not result in a substantive change to the original contract because the contractual rights and provisions for the determination of the contract holder's investment return have not changed. ##### [944-30-55-72](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-72) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:bcacc53cab295bf9c4e4524a6a984209ca572692ea5941eb66940f62510291c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. It is possible that one of the investment allocation alternatives added or elected could be a fixed return option. As long as the contract remains a variable annuity contract and the contract holder retains the right to reallocate amounts to other investment alternatives, neither the addition of the investment alternative nor the contract holder's utilization of that investment alternative would constitute an internal replacement that results in a substantially changed contract. If, however, the contract holder's election of a fixed allocation alternative results in a conversion or partial conversion to a fixed annuity contract or the contract remains a variable annuity contract but the transfer is effectively a conversion or partial conversion because there are substantive restrictions on the contract holder's ability to reallocate amounts to other investment alternatives, the modification would result in a substantially changed contract to the extent of the conversion or substantially restricted balance. ##### [944-30-55-73](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-73) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:a145d4eb9a49e5cea9369bd0d50f31d339becd21c329ab6afde380af359f592b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A variable annuity contract is replaced with a variable annuity contract that also provides a [guaranteed minimum accumulation benefit](https://asc.understandingaccounting.org/glossary/g/#guaranteed-minimum-accumulation-benefit "A minimum accumulation benefit or a guaranteed account value floor that is available to a deferred annuity contract holder in cash."), in this example, a 5-percent annual rollup of contract value in 10 years. The contract exchange of a variable annuity for a variable annuity that contains a guaranteed minimum accumulation benefit results in the replacement contract being substantially changed from the replaced contract because the addition of a guaranteed minimum accumulation benefit, an integrated benefit feature, changes the investment return rights of the contract holder by providing a minimum investment return guarantee. The analysis would be the same if the change had been achieved through the addition of a guaranteed minimum accumulation benefit rider. If, however, the contract holder had elected to add a guaranteed minimum accumulation benefit feature that was included in the original contract (and met the specifications in paragraphs [944-30-35-26 through 35-28](https://asc.understandingaccounting.org/asc/944/30/#944-30-35-26) ), the modification would not be considered an internal replacement. ##### [944-30-55-74](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-74) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:2b497a71c9a5c437600e5fe2b71a4c8a2fc6ed8912f0dbd32d0663870dcadcea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A variable annuity contract is replaced with a variable annuity contract that also provides a [guaranteed minimum income benefit](https://asc.understandingaccounting.org/glossary/g/#guaranteed-minimum-income-benefit "A guarantee that, regardless of account balance performance, the contract holder will be able to annuitize after a specified date and receive a defined minimum periodic benefit. These benefits are available only if the contract holder elects to annuitize."), in this guidance, a 5-percent annual rollup of contract value. A guaranteed minimum income benefit, an integrated contract feature, specifies a manner in which an annuitization benefit is determined if the contract holder elects to annuitize. The guaranteed minimum income benefit cannot be withdrawn or net settled. The contract exchange of a variable annuity for a variable annuity that contains a guaranteed minimum income benefit results in the replacement contract being substantially changed from the replaced contract because the addition of a guaranteed minimum income benefit changes the investment return rights of the contract holder, as a minimum investment return provision, via the guaranteed amount for annuitization, has been added to the variable annuity. The analysis would be the same if the change had been achieved through the addition of a guaranteed minimum income benefit rider. If, however, the contract holder had elected to add a guaranteed minimum income benefit feature that was included in the original contract (and met the specifications in paragraphs [944-30-35-26 through 35-28](https://asc.understandingaccounting.org/asc/944/30/#944-30-35-26) ), the modification would not be considered an internal replacement. ##### [944-30-55-75](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-75) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:1623c5d377752562ee658cd46d84346f7ee05779db06006022366adfe21e123e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The insurance entity either replaces deferred annuity contracts with annuity contracts that contain the [guaranteed minimum withdrawal benefit](https://asc.understandingaccounting.org/glossary/g/#guaranteed-minimum-withdrawal-benefit "A benefit that provides a contract holder a guarantee that a minimum amount (usually stated as a percentage of premiums) will be available for withdrawal over a specific period. Regardless of the contract value, the contract holder is guaranteed the right to periodic withdrawals from the contract until the amount of premiums deposited into the contract is withdrawn.") feature or the insurance entity adds a guaranteed minimum withdrawal benefit rider to existing inforce business (that is, deferred annuity contracts). ##### [944-30-55-76](https://asc.understandingaccounting.org/asc/944/30/#944-30-55-76) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:20.762Z to 2026-09-10T02:16:20.762Z Record version: sha256:922ca0500f461aad2abb8405aa6857373c17bed5f4188ffb6ab5b2f89ef9c647 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A variable annuity with a guaranteed minimum withdrawal benefit is classified as an investment contract with a market risk benefit. The contract exchange of a variable annuity for a variable annuity that contains a guaranteed minimum withdrawal benefit results in the replacement contract being substantially changed from the replaced contract because the addition of a guaranteed minimum withdrawal benefit, an integrated contract feature, changes the investment return rights of the contract holder, as a minimum investment return provision, via the guaranteed withdrawal amount, to the variable annuity. The analysis would be the same if the change had been achieved through the addition of a guaranteed minimum withdrawal benefit rider. If, however, the contract holder had elected to add a guaranteed minimum withdrawal benefit feature that was included in the original contract (and met the specifications in paragraph [944-30-35-26](https://asc.understandingaccounting.org/asc/944/30/#944-30-35-26)), the modification would not be considered an internal replacement.