Treatment of insurance balances by insurance intermediaries under FRS102

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The introduction of FRS102 has resulted in insurance intermediaries, and their auditors, needing to carefully consider the treatment of insurance balances in their financial statements, resulting from a number of enhancements within FRS 102 compared to previous UK GAAP.

Under old UK GAAP, the treatment of insurance balances varied; however, the generally accepted approach to the presentation of insurance debtors, creditors and client or insurers’ monies was to present these items on a gross basis in the financial statements, with the net position, reflecting the unearned commission within insurance debtors, and commission not yet drawn down from the client account.

The generally accepted approach was contrary to the legal relationship between an intermediary, its clients and underwriters which was disclosed within the accounting policies.

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