Difference between B and C in BASIC DDDNG PDR?
Thinking about our mneumonic: BASIC DDDNG PDR. I'm confused about what the difference is between the 'B' and the 'C' - specifically the difference between "balance sheet representation of reinsurance" and "ceded reinsurance - prospective".
The wiki says,
(Regarding the 'B') "Balance sheet presentation of reinsurance: - SAP NETS OUT ceded reinsurance - GAAP does not" (Regarding the 'C') "Prospective reinsurance is easy: SAP shows liabilities NET of prospective reinsurance, GAAP shows them gross."
But aren't these two saying the same thing for two different letters? I just don't see the purpose of the 'B' in the mneumonic, but want to make sure I'm understanding correctly. Thanks!
Comments
"Balance sheet presentation" and "Ceded reinsurance" are two distinction items provided in the text, but Odomirok does not very clearly distinguish between the two.
For B or "Balance Sheet Presentation", the "B" discusses how reinsurance is presented on the balance sheet and does not distinguish between prospective and retroactive, although in the next section, they do mention that this difference is for prospective reinsurance only. (Retroactive reinsurance is treated differently.)
In the next paragraph in the source text, for C or "Ceded Reinsurance", it seems that "C" repeats B but then goes further and explains differences in accounting treatment between prospective and retroactive reinsurance.