The following table identifies the changes made to this Subtopic.
This Subtopic provides insurance entities guidance on the accounting for and financial reporting of policyholder dividends. The guidance in this Subtopic is presented in the following two Subsections:
- a
General
- b
Long-Duration Contracts.
The Long-Duration Contracts Subsections of this Subtopic provide insurance entities guidance on the accounting for and financial reporting of policyholder dividends on long-duration contracts.
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section
944-10-15. The guidance in this Subtopic distinguishes between participating contracts that meet the criteria in paragraph
944-20-15-3 and those that do not.
The Long-Duration Contracts Subsections of this Subtopic follow the same Scope and Scope Exceptions as outlined in the
General Subsection of this Section, with specific instrument qualifications noted below.
The guidance in the Long-Duration Contracts Subsections of this Subtopic applies only to long-duration insurance contracts. For guidance on identifying a long-duration insurance contract, see the
Long-Duration Contracts Subsection of Section 944-20-15.
For participating contracts other than those long-duration participating life insurance contracts identified in paragraph
944-20-15-3,
policyholder dividends shall be accrued. This guidance applies to participating contracts other than those long-duration participating life insurance contracts identified in paragraph
944-20-15-3.
Limitations may exist on the amount of net income from participating insurance contracts of a life insurance entity that may be distributed to stockholders. In that circumstance, the policyholders' share of net income on those contracts that cannot be distributed to stockholders shall be recognized by both: - a
Excluding that share from stockholders' equity by a charge to operations
- b
Recognizing that share as a credit to a liability relating to participating policyholders' funds.
Dividends declared or paid to participating policyholders shall reduce the liability recognized in (b); dividends declared or paid in excess of the liability shall be charged to operations. This guidance applies to participating contracts other than those long-duration participating life insurance contracts identified in paragraph
944-20-15-3.
For life insurance entities for which there are no net income restrictions and that use life insurance dividend scales unrelated to actual net income, policyholder dividends shall be accrued over the premium-paying periods of the contracts. Paragraph 944-740-25-1 states that, although payment is not required, a dividend recognized under this paragraph is considered a planned contractual benefit in computing generally accepted accounting principle (GAAP) liabilities, it may be necessary to identify the amount of this dividend to calculate deferred income taxes in those cases in which there is a question as to whether the dividend provision in the liabilities, together with the dividends paid or declared, may exceed the amount of dividends otherwise deductible for federal income tax purposes. For long-duration participating life insurance contracts that meet the criteria in paragraph
944-20-15-3,
annual policyholder dividends shall be expensed. For example, if a policy has an anniversary date of June 30, at which time annual dividends are paid, at December 31, 19X1, dividends should be accrued for the period July 1, 19X1, through December 31, 19X1.