AHIP Exam AHM-520 Topic 2 Question 84 Discussion

Actual exam question for AHIP's AHM-520 exam

Question #: 84
Topic #: 2

Under GAAP, three approaches to expense recognition are generally allowed: associating cause and effect, systematic and rational allocation, and immediate recognition. A health plan most likely would use the approach of systematic and rational allocation in order to

AReport the payment of the health plan's utility bills

BSpread the payment of sales force commissions over the premium paying period of healthcare coverage

CReport the fees paid by the health plan to attorneys and consultants

DDepreciate the cost of a new computer system over the useful life of the system

Show Suggested Answer

Suggested Answer: B

by Brittni at Apr 11, 2024, 08:58 PM

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Carry

1 months ago

You know, if I were the health plan, I'd just skip the whole 'expense recognition' thing and go straight for the 'expense avoidance' approach. Who needs those pesky utility bills anyway?

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Tammara

10 days ago

User 3: Yeah, that makes sense. It's all about managing expenses efficiently.

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Cecily

11 days ago

User 2: I think the health plan would use systematic and rational allocation to spread out commissions over time.

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Joanna

19 days ago

User 1: I agree, who needs to recognize expenses when you can just avoid them?

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Helga

1 months ago

Ha, I bet the health plan's accountants would love to just immediately recognize all those attorney and consultant fees. Maybe in an ideal world, but GAAP says systematic allocation is the way to go.

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Judy

5 days ago

Definitely, but GAAP requires them to spread out those fees over time.

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Catarina

20 days ago

Yeah, I can imagine the accountants wishing they could just expense everything right away.

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Pearline

1 months ago

Hmm, I was leaning towards D for the computer system depreciation, but I guess that falls under systematic and rational allocation as well. Good catch!

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Simona

5 days ago

User 2: That makes sense, it would help in matching expenses with revenue.

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Sonia

19 days ago

User 1: I think the health plan would use systematic and rational allocation for spreading sales force commissions over the premium paying period.

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Claudia

2 months ago

I agree, B is the best choice. Systematic and rational allocation is the way to go for expenses that have a clear link to the revenue generated.

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Talia

7 days ago

User 4: That way the expenses are matched with the revenue generated.

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Clare

10 days ago

User 3: It makes sense to spread the payment of sales force commissions over the premium paying period.

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Patrick

14 days ago

User 3: I agree, systematic and rational allocation is definitely the way to go for expenses like that.

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Tayna

16 days ago

User 2: I agree, systematic and rational allocation is the way to go.

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Lashawn

19 days ago

User 2: Yeah, that way the expenses are matched with the revenue they help generate.

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Amalia

1 months ago

User 1: I think B is the best choice.

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Annmarie

1 months ago

User 1: I think B is the best choice too. It makes sense to spread out the payment of sales force commissions over the premium paying period.

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Simona

2 months ago

I'm not sure, but I think it could also be D because depreciating the cost of a new computer system over its useful life is a common practice for businesses.

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Germaine

2 months ago

I agree with Selma, it helps in matching expenses with revenue which is important for financial reporting.

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Selma

2 months ago

I think the answer is B because spreading out the payment of sales force commissions over the premium paying period makes sense for a health plan.

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Theron

2 months ago

Option B seems like the right approach here. Spreading the sales force commissions over the premium paying period makes sense to match the expense with the related revenue.

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