LAM04100 - Calculating 바카라 사이트楨바카라 사이트� adjusted BLAGAB management expenses: Step 2: Definition of acquisition expenses: FA12/S80

FA12/S80 explains what is meant by 바카라 사이트渁cquisition expenses바카라 사이트�. These are:

  • commissions (however described) other than commissions for persons who collect premiums from house to house
  • any other expenses payable solely for the purpose of acquiring business, and
  • where expenses are payable partly for the purpose of acquiring business and partly for other purposes, so much of those expenses as is properly attributable to acquiring business.

For accounting purposes acquisition costs are defined in the glossary to FRS103 바카라 사이트業nsurance Contracts바카라 사이트� as 바카라 사이트渃osts arising from the conclusion of insurance contracts including direct costs and indirect costs connected with the processing of proposals and the issuing of policies바카라 사이트�.

They are further defined in note 6 to the Notes on the Profit and Loss Account format in Schedule 3 to The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008: acquisition costs

바카라 사이트渃omprise the costs arising from the conclusion of insurance contracts. They must cover both direct costs, such as acquisition commissions or the cost of drawing up the insurance document or including the insurance contract in the portfolio, and indirect costs, such as advertising costs or the administrative expenses connected with the processing of proposals and the issuing of policies.바카라 사이트�

Since the definition of acquisition costs for accounting purposes and that of acquisition expenses for tax purposes are not identical, the acquisition costs shown in statutory accounts may not necessarily equate to acquisition expenses for tax purposes. One possible difference is that for tax purposes acquiring business includes not just acquiring completely new business but also securing increased or additional premiums or consideration in respect of existing business. Acquisition activity should normally be taken to continue up to the point at which a contract is finalised.

Acquisition costs in accounts are likely to be debited for more than one period of account, i.e. spread. The aim is to match the costs to the income which the business acquired generates. For tax purposes acquisition expenses (as defined for tax purposes) are ordinary management expenses of the accounting period in which they are incurred (FA12/S77(3)). Therefore, any spread amount in the accounts must be reversed out in Step 1 of the BLAGAB E computation. In Step 2, the total (tax defined) acquisition expenses incurred for an accounting period are then spread for tax purposes over seven years in accordance with the rules at FA12/S79 (see LAM04110-04120).