Deferred Compensation and Life Insurance: Recovery and Liability Analysis

Deferred Compensation and Life Insurance: Recovery and Liability Analysis

Question

Background to the Lawsuit

The Riley Company has decided to convince Janet Anderson to remain with the company, even if she leaves the company or dies, by paying 15 per year to her or her estate for the next 10 years. promised to pay $10,000. The Riley Company would like to properly account for this transaction as deferred compensation, but is unsure how to account for the expense. In addition, the Riley Company took out a life insurance policy for Janet and named the company as her beneficiary. The Riley Company wants to determine whether surrender value of life insurance policies can be set off against deferred liability.

In at least 5-7 sentences, summarize the background to the lawsuit and state your assumptions about it. making a case. Define problems and research questions. Include APA references and citations.

Answer to Question 1

Deferred indemnification liabilities may be valued at their present value by individuals. The company can be recorded as the beneficiary since the expected profit is due to late payment dates. An entity cannot recognize it as a beneficiary if its terms do not provide for recognition of the entity as a beneficiary (Smucker 2019). Furthermore, according to IAS 19, costs and services must be recognized immediately after the profit or loss is incurred.

Furthermore, it is possible for the company to purchase the surrender value after the cancellation of the insurance. Note, however, that the term insurance should not have surrender value. If the policy is not canceled by this time, the policyholder is obliged to pay income tax if the surrender value exceeds the premiums paid. If businesses do not have access to insurance but still need it, they can choose to access cash-in on policies (Glaum, Keller & Street 2018). We cannot receive cash surrender value from life insurance policies involving savings or investments. A pure recurring plan does not achieve cash redemption value. However, surrender value can be achieved if the company has a legacy plan. In either case, business-related surrender value cannot be offset as it will gradually increase over time due to insurance coverage.

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