Economics /Accounting and Audit
Shkuta I.V.
postgraduate student of the accounting and audit subdepartment
Taras Shevchenko National University of Kyiv, Ukraine
Peculiarities of accounting in Ukrainian insurance companies
Introduction. Specific character of accounting of
insurance services lies in peculiarities of goods offered by insurance
companies – an insurance service functioning as an insurance market object.
Only insurance companies have right to render insurance services.
Problem
definition. Under present-day conditions accounting of insurance companies has
a series of peculiarities caused by the nature of insurance services and the
national legislation. The activity of insurance companies involves specific
accounts, financial and business transactions. Theoretical, methodical and
organizational aspects of accounting and reporting of activity of insurance
companies become of great practical importance.
Research and
publications. Theoretical basis for researching the mechanism of insurers’
activity is formed by tractates of such
scholars and specialists as: V.D. Bazylevych, R.V. Pikus,
S.S. Osadets, K.S. Bazylevych, O.I. Cherniak,
O.F. Filoniuk, V.S. Len, V.H. Shvets and others.
Aim of research.
To reveal the peculiarities of accounting and reporting in insurance companies
on the basis of regulatory acts research.
Exposition
of basic materials. Today there are various types of economic activity in
Ukraine. According to its subject, there is production, commercial, banking,
insurance, investment activity distinguished etc. One of important types of
economic activity is insurance, which is explained by the fact that under the
circumstances of globalization the market economy grows into the financial one,
the cost turns into the capital and is characterized by accumulation and
growth, thus the role of insurance is increasing. Each of these types of
activity has its own peculiarities that must be reflected in accounting and
reporting.
Regulatory
support for the activity of insurance companies is based on the following
legislative acts: the Law of Ukraine "On Insurance" [1], the Law of
Ukraine "On Financial Services and State
Governing of Financial Service Markets"
[3], Methodical recommendations as to disclosing information on insurers’
activity [6], Methodical recommendations as to the system of
management and disclosure of information by financial institutions [7].
Pursuant to the
above regulatory documents, the subject of insurer’s immediate activity is
insuring, re-insuring and financial activity related with formation,
distribution and management of insurance reserves. Pursuant to article 30 of
the Law of Ukraine "On Insurance", "insurers shall be obliged to
form insurance reserves that would be sufficient for further payment of amounts
covered and insurance claims" [1]. In order to ensure implementation
of the present norm, insurance companies have to create an account of
"Insurance reserves". Given this, the account 49 " Insurance
reserves " is envisaged in the Chart of Accounts.
Also pursuant to
article 30 of the Law of Ukraine "On Insurance", "if an amount
covered for a separate subject of an insurance agreement exceeds 10 per cent of
the paid authorized fund and formed free reserves and insurance reserves, the
insurer shall be obliged to make a re-insurance agreement" [1]. A
subaccount 703 "Income from selling works and services" is envisaged
in the Chart of Accounts as a component of the account 70 " Income from
selling" where income from insurance services, results of unearned bonuses
are defined, and a subaccount 705 "Re-insurance", defining financial
results of the insurer from re-insurance transactions. Each month the balance
of the subaccount 705 is written down (closed) in correspondence with the
subaccount 703 "Income from selling works and services". The balance
of this account is written down in the procedure of closing to the account 79
"Financial results" [8].
Under article 10
of the Law of Ukraine "On Insurance", "an insurance premium
(insurance contribution, insurance amount) is a payment for insurance which the
insured person is obliged to make to the insurer in conformity with the
insurance agreement" [1]. In accordance with the Chart of Accounts the
insurer has to record the receipt of insurance premiums on the account 76
"Insurance premiums" [8].
Peculiarities
of taxation with income tax are set forth and regulated with paragraph 151.2
and paragraph 156.2 of the Tax Code of Ukraine, that stipulate that any insurer
performing insurance of life enjoys income tax rate totaling 0 %, and
paragraph 160.6 stipulates that income gained from any reinsurance transactions
is taxed under the rates: 0%, 4% and 12% depending on whether such insurer is
the resident of Ukraine. Other kinds of insurance activities are taxed under
the income tax rate in accordance with the applicable law: as of 01.11.2011
income tax rate totaled 23 %, as of 01.01.2012 – 21 %, as of
01.01.2013 – 19 %, and starting 01.01.2014 it will total 16 %.
The
value added tax is of crucial importance for gain recognition, as in accordance
with subparagraph 196.1.3 of the Tax Code of Ukraine the following transactions
performed by insurance companies are not subject to levy of this tax:
- “provision of insurance or reinsurance
services by persons licensed for insurance activity in compliance with law, as
well as for related services of insurance (reinsurance) brokers and insurance
agents;
- provision of services related to compulsory
state social insurance (including annuity insurance), non-governmental pension
schemes, attraction and servicing of pension deposits and accounts of
bank-managed fund members, administration of non-governmental pension funds” [2].
Debit entries of
the account 36 "Settlements with buyers and customers" reflect the
value of sales of rendered insurance services, credit entries reflect the
amount of insurance premiums received on enterprise accounts in banking
institutions, in the till, and other types of settlements. The account balance reflects debt of buyers
and customers for services received. Analytical accounting of settlements with
contractors is performed separately for each one [8].
Pursuant to
article 9 of the Law of Ukraine "On Insurance", "an insurance
claim is a sum of money paid by an insurer according to the terms of the
insurance agreement in case of an insured accident" [1], according to the
Chart of Accounts insurance claims are recorded on the subaccount 904
"Insurance claims" of the account 90 "Cost of sales" [8].
Conclusions. 1. Correct and efficient managerial
decisions largely depend on the quality of information reflected in reports.
Formation of reports is a final stage of the accounting process of any economic
entity, including insurance companies, that is why the accounting needs to be
organized in such a way that it is adjusted to reporting needs to the maximum
extent. The article offers systematization of information on accounting in
insurance companies, accounts of accounting are defined that take into
consideration the specific nature of activity of the said institutions.
2. Insurance companies
use the following specific accounts in accounting: 49 "Insurance
reserves", 703 "Income from selling works and services",
705 "Re-insurance", 76 "Insurance premiums",
904 "Insurance claims", which have to be used when representing
business transaction in accounting to prepare tax, financial, statistical and
special reports.
3. There are
special traits in taxation of insurance company activity which lie in the fact
that transactions of social and retirement insurance are not subject to value
added tax, and the rate of income tax depends on the type of a performed
transaction.
Literature:
1.
The Law of Ukraine "On Insurance" of
07.03.1996 ¹ 85/96-ÂÐ as amended as of 29.06.2010.
2.
The Tax Code of Ukraine: Law of Ukraine registered 02.12.2010 ¹
2755-VI // Golos Ukrainy. – 2010. - ¹ 229 – 230.
3.
The Law of Ukraine "On Financial Services and State Governing of Financial Services
Markets" ¹ 2664-²²² of
12.07.01 as amended as of 31.01.2009.
4.
The Law of Ukraine "On Accounting and
Financial Reporting in Ukraine" of 16.07.1999 ¹ 996-XIV.
5.
Regulation of the Cabinet of Ministers of
Ukraine "On approving a declaration form of an insurer on re-insurance
transaction" of 13.06.2002 ¹ 821.
6.
Methodical recommendations as to disclosing
information on insurers’ activity according to the program are approved by a decree of the State Committee for Regulation of
Financial Service Markets of Ukraine of 13.09.07 ¹ 8000 as amended as of
31.01.2009.
7.
Methodical recommendations
as to the system of management and disclosure of information by financial
institutions approved by a decree of the State Committee for Regulation of
Financial Service Markets of Ukraine of 27.12.05 ¹ 5207.
8.
Guidelines on application of the Chart of
Accounts for accounting of assets, capital, liabilities and business
transactions of enterprises and organizations of 30.11.1999 ¹ 291 as amended as
of 25.09.2009.