The Insurance Contract Revenue Is Recognized And Reserve Measurement Studies

As an important part of the financial market, the insurance industry plays an irreplaceable role in the national economy. The operational characteristics of the insurance industry make the insurance contracts have three main features:(1) the uncertainty of future compensation; (2) long-term; (3) the inclusion of savings, assurance, options and other financial instruments. There are difficulties in recognition and measurement of insurance accounting, due to above characteristics. How to recognize the revenue and measure the reserve is the main difficulty. In practice, because of different accounting approach in different countries, the financial statements of insurance companies are lack of comparability. To solve the above problems, the International Accounting Standards Board (IASB) began a project on insurance contracts and issued an exposure draft in 2010. China has also issued the series of new regulations on the insurance accounting. However, due to the initial stage of China's insurance industry, there are very few studies on the insurance accounting, and even it becomes a heterogeneous field of accounting. This situation not only hampers the development of insurance accounting, but also has a negative impact on the development of the insurance industry. This is the context of the paper. On the basis of IASB's research, this paper studies on revenue recognition and reserve measurement from both theoretical and practical points. The author hopes that this paper can make some contributions to improve China's insurance accounting.This paper firstly discusses the basic theory of insurance and accounting. On insurance, the paper mainly discusses the concept, function and role of insurance; on accounting, the paper mainly discusses the measurement attribute. This part aims at paving the way for the following discussions. The conclusion is that the insurance accounting should be based on balance sheet liability method and measured with fair value.In the second part, the paper discusses revenue recognition. The core of revenue recognition is whether to unbundle and how to unbundle the non-insurance risk within the premium. The paper concludes that investment component should be unbundled and compares the differences between bundling and unbundling through examples.In the third part, the paper discusses the insurance reserve, especially three building blocks:the future cash outflows, the time value of money and the margins. In addition, the paper compares three measurement model of insurance reserve liability. The paper concludes that initial measurement should use the present value of the fulfillment cash flows and the margins should be discussed further.The last part of the paper discusses insurance accounting regulations in China. The paper points that the new regulations of insurance accounting have positive effect on China's insurance industry in general. It can not only optimize the structure of insurance products, but also improve the quality of accounting information. Meanwhile, there are some problems in the new regulations, including the mismatch of revenue and cost, profit management. To improve the accounting system of the insurance, we should pay close attention to new trends in international accounting standards, issue implement details as soon as possible, strengthen coordination between accounting rules and regulatory policies and improve the evaluation system.