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Questions and Answers
Insurance receivables are derecognized following the derecognition criteria of financial liabilities.
False
Reinsurance commissions are recognized as revenue immediately upon signing the contract.
False
Deferred reinsurance commissions represent the portion related to the expired periods of the policies.
False
Expenses are recognized in the statement of comprehensive income only when goods are consumed, not when services are utilized.
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General insurance claims are recorded solely based on the settlement of claims, not on notifications received.
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Commissions are recognized as expense immediately upon signing the contract.
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Policy loans are recognized as revenue over the period of the contracts using the 24th method.
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Uncollected premiums are accounted for as provisions for unearned premiums in the statement of financial position.
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Electronic data processing machines are recognized as revenue when due and measured at the original invoice amount.
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Investments in mutual funds are recognized in profit or loss for the year.
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Reinsurance recoverable is included as part of 'insurance contract liabilities' in the statement of financial position.
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Policy loans comprise the total premiums receivable for the whole period covered provided by contracts entered into during the accounting period.
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Uncollected premiums must be reserved for by the ceding insurer under a reinsurance treaty.
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Electronic data processing machines can be acquired by an insurance company and amortized over a period of three years from the date of acquisition.
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Investments in mutual funds are subject to specific conditions provided by the Commissioner.
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Reinsurance recoverable can be considered as an admitted asset by the Commissioner.
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Policy loans are part of the non-admitted assets enlisted in Section 103 of the Insurance Code.
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Funds withheld by a ceding insurer under a reinsurance treaty are not considered readily realizable assets.
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Study Notes
Derecognition of Insurance Receivables
- Insurance receivables are derecognized following the derecognition criteria of financial assets
Commission Income
- Reinsurance commissions are recognized as revenue over the period of the contracts using the 24th method
- The portion of commissions related to unexpired policy periods is presented as "Deferred reinsurance commissions" in the statement of financial position
Expense Recognition
- Expenses are recognized in the statement of comprehensive income upon consumption of goods or utilization of services, or at the date they are incurred
Benefits and Claims
- Benefits and claims consist of policyholder benefits and claims, including insurance contract liabilities, except for gross changes in the provision for premiums
- Internal and external handling costs directly related to claim processing and settlement are included
- General insurance claims are recorded based on notifications received
- Net insurance benefits and claims represent gross insurance contract benefits and claims, less reinsurer's share
Commission Expense
- Commissions are recognized as expense over the period of the contracts using the 24th method
Revenue Recognition
- Revenue is recognized when it is probable that economic benefits will flow to the Company and the amount can be reliably measured
- Revenue is measured at the fair value of consideration received
Premium Revenue
- Gross insurance written premiums comprise the total premiums receivable for the whole period covered by contracts entered into during the accounting period
- Premiums include adjustments arising in the accounting period for premiums receivable in prior periods
- Premiums from short-duration insurance contracts are recognized as revenue over the period of the contracts using the 24th method
- Unexpired policy periods are accounted for as provisions for unearned premiums and included in "insurance contract liabilities"
- Net changes in these accounts during the year are recognized in profit or loss for the year
Insurance Receivables
- Insurance receivables are recognized when due and measured at the original invoice amount, less allowance for uncollectible amount
Admitted Assets
- Admitted assets include reinsurance recoverable, deposits, investments in mutual funds, real estate investment trusts, salary loans, unit investment trust funds, and special deposit accounts
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Description
Test your knowledge on reinsurance recoverables, funds withheld by ceding insurers, deposits from underwriting associations, and electronic data processing machines. Explore key concepts related to recoverable funds and reserves for unpaid losses in the insurance industry.
