Please note that the content of this book primarily consists of
articles available from Wikipedia or other free sources online.
Deferred Acquisition Costs is a term commonly used in the insurance
business. It describes the practice of deferring the cost of
acquiring a new customer over the duration of the insurance
contract. Insurance companies face large upfront costs incurred in
issuing new business, such as commissions to sales agents,
underwriting, bonus interest and other acquisition expenses. DAC
under U.S. GAAP, MSSB and IAS 39 are all very similar, except that
IAS 39 only allows direct, incremental costs to be deferred rather
than all acquisition costs. Insurance companies incur large
expenses when acquiring new business, but to ensure that they
comply with GAAP's matching principle they need to spread out these
costs over the period in which revenues are earned.
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