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FASB posts staff draft of ASU on insurance contract costs

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20 Aug 2010

The FASB has posted a staff draft of the Final Accounting Standards Update (ASU) Insurance (Topic 944): Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts (a consensus of the FASB Emerging Issues Task Force).

The draft ASU results from the July EITF meeting, where the EITF reached a final consensus on which costs incurred during the acquisition of new or renewal insurance contracts are eligible to be deferred and subsequently amortised ('deferred acquisition costs' (DAC)). In relation to a comparison with IFRS, the draft ASU notes:

The guidance on deferred acquisition costs under IFRS is limited and is subject to significant judgment. IFRS neither prohibits nor requires the deferral of acquisition costs, nor does it prescribe which acquisition costs are deferrable, the period and method of their amortization, or whether an insurer should present deferred acquisition costs as an asset or as a reduction in insurance liabilities.

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