Deferred Acquisition Costs (DAC)

Ever get the latest iPhone or Galaxy phone for $100 (or free) just for signing onto a new plan, or at a store that may offer 12-month, no-interest financing for merchandise you're planning to buy? Your carrier is absorbing part of the cost of the phone in its monthly charges to you, although it seems like you got the phone either at a steep discount. That store is essentially using the Deferred Acquisition Costs (DAC) model for spurring sales.

Most often used in the insurance industry, DAC allows insurance companies to write off underwriting costs and broker fees over time as a tax credit against revenues, as long as it's for new business. Accounting rules have different categories for amortization depending on the type of policies underwritten.