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Dear, Mike
Would you explain for me the treatment for this case:
“On 1 oct 2012, Moby received a renewal quote of 400,000$ from the company’s property insurer. THe director was supprised at how much it had increased and believed that it would be less expensive for the company ” self-insure” . Accordingly , they charged 400,000$ to administrative expense and credit same amount to provision.
During the year , the company incurred 250,000 of expense relating to the previous property damage which had been debited to provision.Why if the company choose the ” self issued” it can not create the provision equal to the third party premium?
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