GIM2110 - Accounting framework: annual accounting: Unearned Premium Provision (UPP): example
Motor Insurance Company Ltd has a 31.12.02 accounting period. It enters into the following contracts for motor insurance:
| Contract No. |
Date entered into |
Premium |
| 1 | 1/1/02 | 300 |
| 2 | 27/2/02 | 450 |
| 3 | 1/6/02 | 600 |
| 4 | 5/9/02 | 500 |
| Total premiums |
| 1,850 |
The UPP would be calculated as follows:
|
Contract No. |
24ths Method |
UPP |
365ths Method |
UPP |
|
| 1 | 1/24 x 300 | 13 | 0/365 x 300 | 0 | |
| 2 | 3/24 x 450 | 56 | 57/365 x 450 | 70 | |
| 3 | 11/24 x 600 | 275 | 151/365 x 600 | 248 | |
| 4 | 17/24 x 500 | 354 | 247/365 x 500 | 338 | |
| Total UPR |
| 698 |
| 656 |
