S
Shillington
Member
Q&A Bank Question 6.2 part b.)
This question give some example figures for Company A, premiums, commisions, expenses and claims for years 2013, 14 and 15, and a QS arrangement with Company B. Company B uses a three year accounting basis and the question asks to work out the contribution that the QS contract has to the underwriting result of Company B in years 2013, 14 and 15.
At the end of 2013 the QS contract has resulted in a loss of 2.03 the answer says that "this will be recognised at the end of 2013".
At the end of 2014 the QS contract has from the 2013 YoA has now turned a profit of 4.05 and in the answer it says "of this, 2.03 can be recognised in 2014 and the remainder of 2.02 is carried forward into the third year".
What is this "carrying forward"? As far as I was aware in three year accounting the profit or loss is only recognised at the end of the term, that's the whole point. At inbetween points, i.e. at the end of the first and second year, you have a profit or a loss but nothing is "recognised" until the end of the final year. Why is the original loss "recognised" at the end of the first year?
Thanks,
Shill
This question give some example figures for Company A, premiums, commisions, expenses and claims for years 2013, 14 and 15, and a QS arrangement with Company B. Company B uses a three year accounting basis and the question asks to work out the contribution that the QS contract has to the underwriting result of Company B in years 2013, 14 and 15.
At the end of 2013 the QS contract has resulted in a loss of 2.03 the answer says that "this will be recognised at the end of 2013".
At the end of 2014 the QS contract has from the 2013 YoA has now turned a profit of 4.05 and in the answer it says "of this, 2.03 can be recognised in 2014 and the remainder of 2.02 is carried forward into the third year".
What is this "carrying forward"? As far as I was aware in three year accounting the profit or loss is only recognised at the end of the term, that's the whole point. At inbetween points, i.e. at the end of the first and second year, you have a profit or a loss but nothing is "recognised" until the end of the final year. Why is the original loss "recognised" at the end of the first year?
Thanks,
Shill