Radian Group Inc. Notes to Consolidated Financial Statements - (Continued) Deferred Policy Acquisition Costs Income Taxes 184 Costs associated with the acquisition of mortgage insurance business, consisting of compensation and other policy  issuance and underwriting expenses, are initially deferred and reported as deferred policy acquisition costs.  Amortization of  these costs for each underwriting year book of business is char ged against revenue in proportion to estimated gross profits over  the estimated life of the policies.  This includes accruing interest on the unamortized balance of deferred policy acquisition  costs. Estimates of expected gross profit including persistency and loss development assumptions for each underwriting year  used as a basis for amortization are evaluated regularly and the total amortization recorded to date is adjusted by a char ge or  credit to our consolidated statements of operations if actual experience or other evidence suggests that earlier estimates should  be revised. Considerable judgment is used in evaluating these estimates and the assumptions on which they are based.  The use  of different assumptions would have a significant ef fect on the amortization of deferred policy acquisition costs.  Effective January 1, 2012, we adopted the F ASB update to the accounting standard regarding accounting for costs  associated with acquiring or renewing insurance contracts on a prospective basis.  This update redefines acquisition costs as  costs that are related directly to the successful acquisition of new , or the renewal of existing, insurance contracts. Previously ,  acquisition costs were defined as costs that vary with and are primarily related to the acquisition of insurance contracts.  The  effect of this revised definition of acquisition costs resulted in additional expenses in our mortgage insurance business being  charged to earnings when incurred, rather than being deferred.  There is no change to the amortization requirements due to this  update. This adoption did not impact the financial guaranty business as we have adopted the update prospectively and are not  deferring any acquisition costs within our financial guaranty business.  The implementation of this new guidance has materially  reduced the amount of policy acquisition costs that we defer associated with acquiring new mortgage insurance contracts.  The  lower amount of acquisition costs deferred will result in decreased amortization expense over time, which should partially  offset the impact to our results of operations from the additional expenses char ged to income when incurred at the origination  of an insurance contract. While the timing of when certain costs are reflected in our results of operations will change as a result  of the adoption of this update, there will be no ef fect on the total acquisition costs recognized over time or on our cash flows.  We deferred $20.5 million of policy acquisition costs in our mortgage insurance business in  2012 and $46.2 million during  2011. Under our previous method of accounting for acquisition costs, amounts deferred as acquisition costs for  2012 would  have been $39.6 million. Amounts deferred as acquisition costs for  2012 also reflect a reduction for ceding commissions earned  on risk ceded under the Reinsurance Transactions. We amortized $34.1 million of deferred policy acquisition costs in our  mortgage insurance business in 2012 and $36.1 million during both 2011 and 2010. Deferred policy acquisition costs in the financial guaranty business are comprised of those expenses that vary with, and  are principally related to, the production of insurance premiums, including: commissions paid on reinsurance assumed, salaries  and related costs of underwriting and marketing personnel, rating agency fees, premium taxes and certain other underwriting  expenses, offset by commission income on premiums ceded to reinsurers.  Acquisition costs are deferred and amortized over the  period in which the related premiums are earned for each underwriting year . The estimation of installment-based premiums  requires considerable judgment, and dif ferent assumptions could produce dif ferent results. We amortized $27.7 million, $16.7  million and $17.4 million of deferred policy acquisition costs in our financial guaranty business during  2012, 2011 and 2010,  respectively. There was no impact to the deferred acquisition costs for the financial guaranty business as a result of the adoption  of the FASB update to the accounting standard for deferred acquisition costs. We provide for income taxes in accordance with the provisions of the accounting standard regarding accounting for  income taxes. As required under this standard, our deferred tax assets and liabilities are recognized under the balance sheet  method, which recognizes the future tax ef fect of temporary dif ferences between the amounts recorded in our consolidated  financial statements and the tax bases of these amounts. Deferred tax assets and liabilities are measured using the enacted tax  rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or  settled.