Definition
Earned But Not Reported (EBNR) refers to the premium amounts that an insurance company anticipates to receive for insurance policies that have been effectively provided but for which the final contracts are not yet entirely completed, and thus, the exact premium amounts are yet to be fully determined and reported.
Explanation
In insurance accounting, EBNR consists of premiums from policies that are effective and for which coverage has been provided during the reporting period, but the reporting and final settlement have not taken place as of the end of the financial reporting period. It is similar to the concept of accrued revenue in general accounting, where revenue is recognized before it is actually received.
EBNR entries help ensure that an insurance company’s financial statements provide a true representation of its earned revenue within a particular reporting period, reflecting income commensurate with the insurance coverage extended.
Accounting Implications
For an insurance company, recognizing EBNR is essential for accurate revenue reporting and compliance with principles like those from the International Financial Reporting Standards (IFRS) or the Generally Accepted Accounting Principles (GAAP) in the U.S.
In keeping with these standards, insurers often have a meticulous system for estimating these amounts accurately to reflect income that should logically be included within the current financial statements, despite not being fully processed or reportedly received.
For further details and a deeper understanding, you are encouraged to refer to:
- IFRS Standards related to insurance contracts,
- U.S. GAAP guidelines,
- Local regulations and laws specific to insurance accounting which might vary by jurisdiction.
