Question

Acquisition costs (commissions, underwriting) are high 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?

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.