Life profit accounting: an actuary's view
Article Abstract:
The Association of British Insurers (ABI) has issued a report that deals with the proper recognition of earned profits by life insurance companies. The ABI believes that there should be changes to the accounting for life insurance profits because the extant methods do not yield an accurate assessment of financial performance. The methods are based on applications of the Companies Act that are likely to be superseded by future European Community laws, and the increase in stock market activity has made it necessary for life insurance companies to offer embedded value information. The ABI proposals for a new life profit accounting regime should be able to be accepted with proper communication. The embedded valuation technique offers could establish value if different controls on assumptions were made to reach a proper level of prudence.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1991
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Life accounting - a new role for auditors: life insurers agree on an accounting basis for reporting profits that is 'true and fair'
Article Abstract:
The financial reporting of UK life insurance companies has been recognized as deficient since the profits to shareholders under the present system do not actually reflect the commercial reality due to the cash accounting principles used in the industry. The Association of British Insurers (ABI) has sponsored an industry initiative to remedy the problem and has issued draft proposals for an alternative method for calculating the profits of life insurance companies. The ABI proposal uses an accruals method that satisfies six principles, including: recognition of profits over the term of a contract; no initial losses on contracts expected to be profitable; and production of profit patterns conducive to applying price/earnings ratios for valuing company shares.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1990
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Accounting for bonds under the bear: the economic downturn made new advice on accounting for convertible bonds vital
Article Abstract:
The Institute of Chartered Accountants in England And Wales' Financial Reporting Committee issued a recommendation on the accounting for convertible bonds, TR 827, on 15 Feb 91. TR 827 establishes an accounting treatment for firms that change the practice of charging the coupon rate of interest to charging the true effective interest rate to its profit and loss (p&l) account. Three options are offered for accounting for supplemental back dated interest: in the year of account, charging the interest through the p&l account; in the years remaining to redemption, charging equal installments through the p&l account; or as an adjustment to the prior year.
Publication Name: Accountancy
Subject: Business
ISSN: 0001-4664
Year: 1991
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