- US GAAP
ASC 325 comprises four Subtopics (Overall, Cost Method Investments, Investments in Insurance Contracts, and Beneficial Interests in Securitized Financial Assets). Below is an overview of each Subtopic.
ASC 325-10 discusses the various investment-related Topics and Subtopics of the Codification.
ASC 325-20 provides guidance on investments using the cost method. ASC 325-20 notes that "the cost method is generally followed for most investments in noncontrolled corporations, in some corporate joint ventures, and to a lesser extent in unconsolidated subsidiaries, particularly foreign."
ASC 325-30 notes the following in regards to the guidance contained in this Subtopic:
There are a few basic structures currently used as a framework for most policies in the marketplace. However, these structures can be combined and modified in many different ways and, therefore, can be quite complex. All of the following life insurance policy structures are considered in this guidance:
- Individual-life policy. The individual-life policy generally has one contract value component and, in some cases, a surrender charge. The amount that could be realized for this policy upon surrender is the amount reported by the insurance entity to the policyholder as the cash surrender value.
- Multiple individual-life policies. Many entities purchase separate individual-life policies for each employee. Similar to the individual-life policy, each policy has only one contract value component and in some cases a surrender charge. If one or more, but not all, policies are surrendered, the policyholder will incur the surrender charges on those policies surrendered. This will result in a permanent loss of asset value to the extent of the surrender charge. However, a rider (or a contractual stipulation) can be obtained for the insurance policy that will waive the surrender charges on each individual policy if all of the policies are surrendered at the same time. The cost of the rider will vary depending on the individual facts and circumstances.
- Group-life policy. The group-life policy constitutes the legal contract with the insurance entity that covers individual-life insurance for multiple employees. Each individual in the group policy is issued a certificate. If the group policy is cancelled, each of the individual certificates is terminated. While certificates are issued pursuant to the policy and form part of the policy, the group-life policy contract is the controlling document. Under the group-life policy, individual-life insurance certificates can be surrendered separately and the cash surrender value for the certificate is received by the policyholder for the full surrender amount of that certificate.
In addition to a discussion on general investments in life insurance contracts, ASC 325-30 also provides guidance on accounting for investments in life settlement contracts.
ASC 325-40 provides guidance on the "accounting for a transferor's interests in securitized transactions accounted for as sales (see Topic 860) and purchased beneficial interests."