Surplus from Income Statement Template

edited September 2019 in Odomirok.8-9-IS

I was doing problems from the template and missed it every time. I am confused.
According to the template solution, Policyholder dividends and Foreign Income Tax are part of net income.
According to the wiki they are because they are a part of "Other Income"

other income= SUM(agents' balances charged off, service fees, aggregate write-ins) – (dividends to policyholders) – (fed/foreign taxes incurred)

But in the template, "Other Income" for the calendar year is given. Isn't this double counting those items?

Comments

  • edited September 2019

    I'm not sure which problem you're referring to. At first, I thought it was the practice template that's modeled on 2017.Fall Q10. But "Other Income" is provided as item J in the table. Is it possible that you just need to scroll down to see the bottom part of the table with the given information?

    P.S. I'm sure you know that if you press the "Cheat" button, it shows you exactly how the calculation is done. In this case, you just add up all the positive and negative values in the "Net Income" and "Direct Charges" column.

  • edited September 2019

    Yes the template. Yes. Other Income is Item J. But Items K and M are policyholder dividends and foreign income tax which should have already been included in J, but according to the table they are subtracted again. Unless the assumption is that "other income" refers to the part of the formula in parentheses.

  • So, consulting the source text. Odomirok pg 39:
    "The income statement is presented on the top portion of the Statement of Income on page 4 of the Annual Statement and provides the three sources of income, before federal and foreign income taxes and dividends to policyholders, separately: underwriting income, investment income and other income."

    So, the problem is correct and the template is based on the problem. The wiki is confusing me. But, I think the main point I've learned is that the "Other Income" line 15 of the income statement is BEFORE policyholder dividends and foreign taxes. So, if we are given IS information, know that we have to subtract it.

  • Sorry, I see what you mean now. I've modified the formulas in the wiki to be consistent with the text and exam problems. Originally, I was using the term other income generically to mean everything other than U/W income and net investment income which would include policyholder dividends and fed/foreign taxes. But that's not how Odomirok uses the term. They specifically separate policyholder dividends and fed/foreign taxes from other income.

    The old version of the wiki formula is archived and a link is provided in the relevant section of the wiki just before the clarified version of the income statement formulas. We will also tweet that a change has been made.

    Thanks for pointing this out.

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