Financial accounting module 22: Revenue and expense homework assignment


Financial accounting module 22: Revenue and expense homework...

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Financial accounting module 22: Revenue and expense homework assignment

(The attached PDF file has better formatting.)

An insurer writes a two-year policy on December 31, 20X1, and expects to

●    receive on December 31, 20X1, premium of 300
●    incur and pay on December 31, 20X3, a claim for 260

The discount rate for this insurance contract is 5% per annum. For simplicity, the acquisition cash flows and the risk adjustment for non-financial risk are zero. The coverage units are the same in 20X2 and 20X3.

A.    What are the fulfilment cash flows at initial recognition?
B.    What are the fulfilment cash flows at December 31, 20X1, after the premium is received?
C.    What are the fulfilment cash flows at December 31, 20X2?
D.    What is the contractual service margin at initial recognition?
E.    What is the contractual service margin at December 31, 20X2, after the allocation to profit or loss?
F.    What is the insurance finance expense in 20X2?
G.    What is the insurance finance expense in 20X3?
H.    What is the insurance revenue in 20X2?
I.    What is the insurance revenue in 20X3?


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