A Gap in Insurance GAAP?

Document Type


Department or Administrative Unit


Publication Date



There's a new philosophy in the marketplace about life insurance, and we believe it warrants a change in the accounting method used for this popular investment product. Traditionally, life insurance has been viewed as a legacy paid to designated beneficiaries after the insured's death. But in recent years policyholders have begun to view it as an underused asset, a source of significant financial resources they can tap while they are still living by selling their insurance to third parties. With the emergence of the multi-billion-dollar viatical and life settlement markets to facilitate these purchases, some accountants have begun to question the appropriateness of FASB Technical Bulletin no. 85-4, Accounting for Purchase of Life Insurance, that adopted the cash surrender method as the only generally accepted method of accounting for these assets. Many CPAs feel it fails to properly reflect the investment nature of life insurance purchases in these markets, resulting in financial reporting that lacks adequate transparency.


This article was originally published in Journal of Accountancy. The full-text article from the publisher can be found here.

Due to copyright restrictions, this article is not available for free download from ScholarWorks @ CWU.


Journal of Accountancy


© 2005 Association of International Certified Professional Accountants. All rights reserved.