Deferred Acquisition Costs

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Deferred Acquisition Costs

In insurance, an expense to a customer that an insurance company initially pays, but recoups the funds from the customer gradually over the life of the insurance policy or other contract.
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CHICAGO -- A very challenging macro environment is leading to goodwill impairments, negative deferred acquisition cost (DAC) unlocking, and other GAAP loss recognition associated with changes in long-term reserve assumptions.
Depressed financial markets, catastrophic events, rising costs of guarantees and options, deferred acquisition cost write-offs, concerns over reinsurance security and corporate scandals in the financial community have taken their toll on the insurance industry.
Early in 2012, similar to its peers, Lincoln took a retrospective accounting charge to write down a portion of its deferred acquisition cost balance.
Implementation of the Deferred Acquisition Cost (DAC) accounting change, which is expected to reduce adjusted operating income by $0.
This current unprecedented low persistency environment significantly impacts both our earned premium stream and accelerates the amortization of our deferred acquisition cost asset.
A number of significant factors contributed to these expected losses, including adverse mortality experience driven by an unexpected increase in the number and size of reported claims during December 2002 and January 2003, losses incurred in connection with the novation of certain life reinsurance contracts to XL Life and the retrocession back to the Company of a portion of certain of those contracts, deferred acquisition cost write downs associated with the Company's largest annuity reinsurance agreement, losses associated with the termination or recapture of certain of the Company's reinsurance agreements and increases in the Company's reserves for guarantees associated with variable annuity contracts.
2) Asset Intensive is net of DAC offsets of $(39,163) included in change in deferred acquisition cost associated with change in value of embedded derivative.
Elimination of after-tax deferred acquisition costs as these amounts represent net deferred expenses that have already been paid and will be expensed in future accounting periods.
If the joint project goes according to plan, the industry needs to get ready for the valuation of insurance liabilities based on expected cash flows, financial market and policyholder behavior assumptions that are updated at every valuation date, margins for risk and to defer day-one profits, and no deferred acquisition costs.
The AICPA staff, helped by industry experts, released a set of technical questions and answers (Q&As) on financial accounting and reporting issues related to Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts.
The AICPA Accounting Standards Executive Committee (AcSEC) issued Statement of Position (SOP) 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts, effective for replacements occurring in fiscal years beginning after December 15, 2006.
For many companies, some portion of the share-based payment cost should be included in one or more balance sheet amounts such as inventory, property, plant and equipment (for self-constructed assets), software costs, contract accounting costs, deferred acquisition costs or loan origination costs.