Hi, Appologies if this is already listed as a question. I have two problems with this question. 1. For non-acquisition expenses it says these stay the same in monetary terms but the solution has kept them the same in percentage terms which is different. If they stay the same in monetary terms per contract then the percentage of WP changes from 5% to 5.32% (5/0.94). 2. I thought gains and losses on the value of assets should form part of the profit or loss for the year and is also taxable. The solution has assumed that gains and losses are not part of profit and do not form part of the tax calculation. Why is this the case? Can I also clarify that when showing UPR net of aquisition costs we do not hold a DAC asset or use it in any way. Why is the question written 'net of DAC' when no DAC is actually held? Thanks in advance, Rob
I take your point - so many people interpret this question differently, I don't think it's a major issue. That particular complication doesn't really test understanding anyway - I'm planning to take it out of the tutorial question in the future! We're not told the purpose of the accounts, and a completely acceptable approach would be as you suggest, to include gains/losses in the investment income figure. You'll end up with slightly different figures later on, and that's fine. DAC is held - but not shown explicitly as an asset, we've just netted it off the UPR (so shown it as a negative liability instead). If you show UPR net of DAC, then you don't have an increase in DAC in your revenue account.
