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  • Writer's pictureThomas Tsang

Key man insurance accounting

key man insurance is a type of financial assets. If it has to pay a lump sum, with bonus return over the life of the insurance. The insurance is exposes to equity for the bonus return. It should be accounted for as fair value through profit and loss.

The fair value should consider the fair value of the underlying fund invested.

The cash surrender value is not appropriate as it is not for cancellation. The discounted benefit insured is also not appropriate as it is hard to estimate when the key man died. However, morality rate could one of factor to consider when measure the fair value of the benefit.

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