NEGROS ORIENTAL STATE UNIVERSITY CHAPTER EXAM

CONCEPTUAL FRAMEWORK AND ACCOUNTING STANDARDS

NEGROS ORIENTAL STATE UNIVERSITY

College of Business Administration
Accountancy Department

CHAPTER EXAM

CFAS (OVERVIEW, CONCEPTUAL FRAMEWORK FOR REPORTING & PRESENTATION OF FINANCIAL

STATEMENTS )

INSTRUCTION: READ THE PROBLEMS CAREFULLY AND ANSWER IT CORRECTLY.

PROBLEM 1

Use the following information for the next three questions:

Entity A, a manufacturing entity, obtains insurance against product liability from Entity B, an insurance
company. Entity B then cedes the insurance contact with Entity C, another insurance company.

1. How does Entity B account for the insurance contract with Entity A?
a. General model
b. Premium Allocation Approach
c. a or b
d. Not accounted for under PFRS 17

2. How does Entity C account for the insurance contract ceded by Entity B?
a. General model
b. Premium Allocation Approach
c. a or b
d. Modification to general model for reinsurance contracts held

3. How does Entity B account for the insurance contract ceded to Entity C?
a. General model
b. Premium Allocation Approach
c. a or b
d. Modification to general model for reinsurance contracts held

4. The "premium allocation approach" cannot be applied to which of the following insurance contracts?
a. insurance contracts issued
b. reinsurance contracts issued
c. reinsurance contacts held
d. insurance contracts with significant variability in their fulfillment cash flows.

5. The unearned profit from a group of insurance contracts is referred to under PFRS 17 as
a. fulfillment cash flows.
b. contractual service margin.
c. onerous contracts.
d. discretionary participation feature.

In the end, what matters most is how your life mattered to the lives of others. Everything else is just a passing moment.

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