concentrations of credit risk

Broad Transactions2

1. 825-10Overall825 Financial Instruments

   ASC 825-10 provides the overall guidance for financial instruments, containing two sets of rules: the fair value option (FVO), which lets any entity irrevocably elect, at specified election dates, to measure eligible financial assets, financial liabilities, firm commitments, and written loan commitments at fair value with changes in earnings; and incremental disclosures about the fair value of financial instruments, concentrations of credit risk, and market risk. The FVO is elected instrument by instrument, only for an entire instrument (not specific risks or cash flows), and is intended to mitigate earnings volatility from measuring related assets and liabilities differently without applying hedge accounting.

2. 825-944Financial Services—Insurance825 Financial Instruments

   This subtopic applies the financial instruments guidance to insurance entities, covering investment contracts and disclosures about concentrations of credit risk arising from reinsurance contracts. Amounts received under investment contracts are not revenue; they are recorded as liabilities and accounted for like interest-bearing or other financial instruments, with related deferred acquisition costs reported as an asset. Ceding entities must disclose credit risk concentrations for reinsurance recoverables and prepaid reinsurance premiums, and must disclose the carrying amount of securities deposited with state regulatory authorities.