Statements of Position



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This proposed industry accounting guide (guide) provides guidance on applying generally accepted accounting principles in financial statements of insurance agents and brokers (brokers). Briefly, the proposed guide recommends the following: 1. For services involving the placement of insurance coverage, brokers should recognize revenue from regular commissions, negotiated commissions, and shared or split commissions on the revenue recognition date, which is the date when all of the following criteria are met: a. Protection is afforded under the insurance policy (that is, coverage is effective). b. The premium due under the policy is known or can be reasonably estimated. c. Substantially all required services related to placing the insurance have been rendered. That date generally is the date on which the premium is billable to the client. d. No significant obligation exists to perform services after the insurance has become effective. The proposed guide also provides guidance for the recognition of revenues related to contingent commissions, commission adjustments, installment billing arrangements, multiyear policies, direct billing arrangements, fees in lieu of commissions, and fee-for-service arrangements. 2. A broker's costs associated with the placement of insurance coverage and costs of subsequent servicing of such coverage should be expensed as incurred. If a broker specifically obligates itself by agreement with the client to provide services after placing the coverage, and the subsequent costs can be associated directly with the coverage placed by the broker, a portion of the broker's related revenue should be deferred and recognized as the services are performed. 3. Fiduciary funds and premiums receivable should be included as assets, and premiums payable to underwriters should be included as liabilities in brokers' balance sheets. The amounts of fiduciary funds, premiums due from clients, advances to underwriters and clients, and premiums payable to underwriters should be disclosed in brokers' financial statements. The proposed guide provides additional guidance on revenue and expense recognition practices by reinsurance intermediaries, managing general agents, and life insurance agents and brokers. The proposed guide also discusses expense recognition by brokers affiliated with insurance underwriters and intangible assets acquired in a business combination.

Publication Date


Relational Format



Insurance -- Accounting -- Standards


Accounting | Taxation


Originally published by: American Institute of Certified Public Accountants; Copyright and permission to reprint held by: American Institute of Certified Public Accountants.

Proposed industry accounting guide : insurance agents and brokers ;Insurance agents and brokers; Exposure draft (American Institute of Certified Public Accountants), 1991, Aug. 15



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