CA Abhishek Singh (practice) (2106 Points)
18 August 2010
Faiz Ahmed
( Article Trainee)
(1731 Points)
Replied 18 August 2010
When you pay premium based on some ULIP, its like an investment(invested in mutual funds or other units), So we show it in Balance sheet.
In general cases where premium is merely paid for insurance purpose, it is like a charge against profit and hence not shown in balance sheet rather charged to P&L( e.g.-- Fire Insurance)
However, It depends upon Co. Accounting Policy whether to treat such premium paid as an asset(show in B/s) or treat as charge against profit( show in P&L).
SOUMYA RANJAN SAHOO
(Article)
(24 Points)
Replied 03 November 2010
It depends on the facts & circumstances of each case.
Asset is a resource controlled by the enterprise,as a result of past events from which future economic
benefits are expected to flow into the enterprise.
In the instant case, though future economic benefits are expected to flow into the enterprise due to payment of insurance premium, but still there doesn't exist a resource controlled by the enterprise.
The company has no control over the insurance premia already paid. So it is not to be classified as an asset.
In the case of ULIP, the premium itself is included in the investment made. The company has control over the recovery of investment made along with return in future. So it is reasonable to assetise it as an investment, which will appear in the Balance Sheet.
pankaj
(Manager-F&A)
(22 Points)
Replied 29 August 2011
Hello Friends,
Pls consider a case of Money Back Insurance policies( where one is certain about the money to be received in future e.g.30% of sum assured after 4 year; 30% after eight year and so on) and also of Endownment policies case.
In these cases what should be the accounting of insurance premium paid.
Thanks & Regards
CAclubindia
