SPECIFICITIES OF INSURER’S REVENUE ACCOUNTING

Abstract

The insurers’ revenue accounting is specific due to the fact that their revenue is different from the usual revenue of other financial and non-financial enterprises. Such specificities result from the type of insurance they have been licensed for by the state insurance supervisory authority, and namely direct insurance, active or passive reinsurance. These specificities of insurance revenue are relevant to their content, classification by types, measurement and recognition, occurrence periods, accounting methods and methodology and synthetic accounts under which they are accounted for.
Insurer’s revenue results from their ordinary activities, which are part of the wide scope of financial services offered by the financial enterprises. Insurance business is strictly regulated by the law due to the higher degree of realisation of insurance and financial risks, and therefore it is subject to licensing by the state regulatory authority Insurance Supervision Division at the Financial Supervision Commission (FSC). Thus, insurance revenue is mainly realised from the insurers’ ordinary activities related to the licenses obtained for entering into non-life insurance contracts (property and health insurance, liability insurances, casualty, travel assistance, etc.), life insurance licenses or reinsurance licenses.
Any information about earned revenue from insurance, financing and other activity during the reporting period is disclosed by the insurers in their financial statements for this period. Insurers’ revenue are stated and disclosed in their financial statements as insurance revenue, investment revenue as a result of transactions with financial assets and financial instruments and revenue realised from other non-ordinary activities they have carried out during the reporting year.
Revenue must be presented and disclosed truly and fairly, in all material respects, in the Statement of profits and losses and other comprehensive income of the insurers for the relevant reporting period, while observing the Matching principle, the Accrual principle, and all accounting rules, principles, concepts and conventions.
The objective of this study is to present, substantiate and distinguish the specificities of insurers’ revenue accounting by substance, type and occurrence method. The object of this study refers to the specificities of the insurers’ revenue accounting. The studied subject matter covers the creation of reliable information about reported revenue of insurers, which must be disclosed, in all material respects, in their financial statements.