2018
DOI: 10.1177/0148558x18773841
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Insurance Acquisition Costs: Capitalizing Versus Expensing

Abstract: This article examines whether the capitalization–amortization or the direct-expensing method for insurance acquisition costs and commissions better reflects the economic substance. We find that both the currently capitalized–amortized acquisition costs and the as-if asset balance of expensed commissions are positively associated with the market value of equity, and are closely related to the level and volatility of subsequent insurance premiums. Results also show that when explaining the market value of equity… Show more

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