When is revenue recognized under the Asset-Liability approach?

Revenue recognition under the Asset-Liability approach is focused on the transfer of control of an asset, which in this context relates to the premiums collected by the insurer for services or coverage provided under an insurance policy. According to this approach, revenue is recognized when the insurer has the right to the economic benefits associated with the premium, which occurs once the insurer gains control over the premium.

This principle aligns with the overall concept of the Asset-Liability approach, where the timing of revenue recognition directly relates to the obligations and rights of the parties involved, particularly focusing on the insurer's control over the asset (premium). Premiums are not recognized solely at the time of cash receipt or booking as written because they represent a liability until the coverage period has passed and the insurer has fulfilled its obligation. Recognizing revenue at the end of the policy term would not reflect the ongoing service commitment through the policy duration; thus, the most accurate point of revenue recognition is when the insurer gains control of the asset associated with the premiums, aligning with the Asset-Liability approach's principles.