Question

Acquisition costs (commissions, underwriting) are high

Q: Answer-Acquisition costs (commissions, underwriting) are high and incurred upfront on 1 Oct. Policies are e...

Acquisition costs that vary with and are directly attributable to securing insurance contracts are typically deferred DAC and amortised over the coverage period, aligned with premium recognition, subject to recoverability. Immediate expensing may distort matching.

and incurred upfront on 1 Oct. Policies are expected to persist on average 9 months (lapse experience). Which approach best reflects recognition of acquisition costs under prudential accounting aligned with matching?

A Expense all acquisition costs immediately since policies are short-term.

B Defer acquisition costs and amortize over expected policy term matched to premium revenue (subject to recoverability test).

C Capitalise as intangible assets and amortise over 5 years.

D Recognise as prepayment and amortise only if claims exceed a threshold.

E Charge to equity as a reserve adjustment.

Practice Next

More Banking Operations Questions

Accountant का उपयुक्त हिंदी पर्याय है-
'बुरे उद्देश्य से की गयी गुप्त मंत्रणा' के लिए एक शब्द है
निम्नलिखित में से कौन सा वर्ण उष्म व्यंजन है ?
कौन सा समास बहुव्रीहि समास में आता है -
' गजानन ' में कौन-सा समास है ?
सूची – I को सूची – II से सुमेलित कीजिए और सूचियों के नीचे दि...
आत्मकथ्य कविता किस लेखक ने लिखी है ?
निम्नलिखित में से कौन सा सुमेलित युग्म नहीं है

निम्नलिखित प्रत्येक प्रश्न में दिए गए शब्द में प्रयु�...
सूची 1 को सूची 2 से सुमेलित कीजिए और सूचियों के नीचे दिए गए ...

Acquisition costs (commissions, underwriting) are high

Solution