Bobadah, thx for the explanation, but I'm a bit slow.. >_<"
Say for example a hypothetical super simple insurance company received premium of $100, which they expect PV of future claim to be $92.
DR Bank $100
CR Income $100
DR P&L Expense - Claim provision $92
CR Balance Sheet Liability - Claim provision $92
Ending result: $8 profit.
Then their $100 earn $5 profit.
DR Bank $5
CR Income $5
Total profit : $13.
But the claim at $92 is understated because it is PV; if it is not discounted it might be , say $102?
Bobadah, thx for the explanation, but I'm a bit slow.. >_
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