Perspective and Issues
Definitions of Terms
Concepts, Rules, and Examples
Investments in Life Settlement Contracts
The investment method
The fair value method
Presentation in the statement of financial position
Income statement presentation
Cash flow statement presentation
Disclosure of accounting policy
Disclosures when using the investment method
Disclosures when using the fair value method
Beneficial Interests in Securitized Financial Assets
Impairment and interest income on purchased and retained beneficial interests in securitized financial assets
Accounting Standards Codification (ASC) 325-30, Investments–Other–Investments in Insurance Contracts, provides guidance for investments in insurance contracts. A life settlement contract is an agreement executed between a third-party investor and the owner of a life insurance policy where (1) the investor does not have an insurable interest in the life of the insured, (2) the investor pays an amount in excess of this policy’s cash surrender value to the policy owner, and (3) upon the death of the insured, the face value of the policy is paid to the investor. These investments may be facilitated by a broker or transacted directly between the investor and the policy owner.
ASC 325-40, Beneficial Interests in Securitized Financial Assets, provides guidance on another type of investment. When a reporting entity sells a portion of an asset that it owns, the portion retained becomes an ...