DEFINITION of 'Deferred Acquisition Costs - DAC'

Typically used in the insurance industry, this is when a company defers the sales costs that are associated with acquiring a new customer over the term of the insurance contract.

BREAKING DOWN 'Deferred Acquisition Costs - DAC'

Most of the sales costs arise from referral commissions to external distributors and brokers.

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RELATED FAQS
  1. What are some examples of deferred revenue becoming earned revenue?

    Understand specific examples when a company's deferred revenue is converted to earned revenue, and learn the principles behind ... Read Answer >>
  2. What types of companies tend to have the most deferred revenue?

    Learn what types of companies tend to have the highest levels of deferred revenue. Understand when deferred revenue is recognized ... Read Answer >>
  3. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  4. How is a deferred tax asset taxed?

    Find out how the IRS and FASB treat deferred tax assets, which a company can recognize in order to reduce its future tax ... Read Answer >>
  5. How does a company derecognize a deferred tax liability?

    Learn about how deferred tax liabilities arise, when they must be reported in the financial statements, and how a company ... Read Answer >>
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