TIA and FAIT
Can you explain to me why we remove prepaid expend in FAIT but don't remove it in TIA, cause i think it should be removed in TIA too cause it is already paid out
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Can you explain to me why we remove prepaid expend in FAIT but don't remove it in TIA, cause i think it should be removed in TIA too cause it is already paid out
Comments
Here is Odomirok's explanation, on page 234:
The elements that go into the calculation of funds attributable to insurance transactions differ from total investable funds in two ways. First, mean policyholders’ surplus is not included in the calculation of funds attributable to insurance transactions. This is because here the focus is on funds attributed to insurance transactions and not to capital and surplus. Second, prepaid expenses in the unearned premium reserves are not included in the calculation because they are not an investable asset; they have already been expensed. These expenses were not explicitly removed in the calculation of total investable funds because they are already out of policyholders’ surplus, which is a component of the calculation.