The Accounting Review Vol. 14 No. 4 1939
ACCOUNTING FOR INVESTMENTS IN LIFE INSURANCE.
Abstract
A number of texts and reference books on accounting were examined for the purpose of learning the correct method of computing the value of a nonparticipating life-insurance policy, for presentation on the balance sheet of a going concern. Most of the books examined omitted all mention of the subject. In the five books that mentioned it, four different methods were recommended. In the case which the author had under consideration, the four methods produced four different answers. The variation between the high and low answers was substantial. A study of the four recommended methods convinced the author of this paper that the variations were not due to differences of opinion on the relative merits of the various methods, but to several causes. One is that accuracy has not been earnestly sought. The proper valuation of life-insurance policies owned is relatively unimportant, because the asset value is not large, and a misstatement does not seriously distort the balance sheet. Another cause is that a life-insurance policy is a unique combination of investment and expense. Accounting principles applicable to investments and accounting principles applicable to expense are alike involved in determining the asset value.
- DOI
- 10.2308/tar-7062635
- Volume
- 14
- Issue
- 4
- Pages
- 381-391
- Language
- en
- Sources
- openalex crossref