Deferred policy acquisition cost (DAC, policy cost that can be deferred and amortized. DAC method or delay method. At present, it is adopted by many countries in the world. However, the income brought by this business is gradually recognized over time during the policy period.
Deferred acquisition cost (DAC).
The insurance company's expenses for obtaining business, including agent's commission, marketing premium, handling fee and other related expenses. These expenses are the acquisition cost of the policy, also known as the acquisition cost of the policy or the acquisition cost of the contract. However, the income brought by this business is gradually recognized over time during the policy period.
Therefore, under the accrual basis, in order to match the income and expenditure in time, the acquisition cost of the policy is capitalized, and the corresponding acquisition cost of the policy should not be recognized as an expense when it occurs, but should be capitalized as an asset on the balance sheet and gradually amortized during the life cycle of the insurance contract. The assets thus established are called deferred acquisition costs (DAC).