GIM2110 - Accounting framework: annual accounting: Unearned Premium Provision (UPP): example

Motor Insurance Company Ltd has a 31.12.07 accounting period. It enters into the following contracts for motor insurance:

Contract No.	Date entered into	Premium
1	1/1/07	300
2	27/2/07	450
3	1/6/07	600
4	5/9/07	500
Total premiums	-	1,850

The UPP would be calculated as follows:

Contract No.	24ths Method	UPP	365ths Method
1	1/24 x 300	13	0/365 x 300	0
2	3/24 x 450	56	57/365 x 450	70
3	11/24 x 600	275	151/365 x 600	248
4	17/24 x 500	354	247/365 x 500	338
Total UPP	-	698	-	656