Unearned premiums and unpaid claims on certain insurance coverage issued to finance customers by a subsidiary may represent intra-entity items because premiums are added to the consumer loan account, which is in turn classified as a receivable until paid, and most or all of the payments on claims are applied to reduce the related finance receivables. Therefore, unearned premiums and unpaid claims on certain credit life and credit accident and health insurance policies issued to finance customers shall be deducted from finance receivables in the consolidated balance sheet. Alternatively, the balance sheet may present only the net finance receivables if the notes to the financial statements contain sufficient disclosure of unearned premiums and unpaid claims and the allowance for losses. Unearned premiums and unpaid claims for credit life and accident and health coverage shall not be applied in consolidation against related finance receivables for which the related receivables are assets of unrelated entities. In those circumstances, such amounts shall be presented as liabilities.
In the consolidated financial statements, unpaid claims for property insurance and level term life insurance shall not be offset against related finance receivables because finance companies generally do not receive substantially all proceeds of such claims. That prohibition also applies to credit life and accident and health coverage written on policies for which the related receivables are assets of unrelated entities. In those circumstances, such amounts shall be presented as liabilities.
A financial institution that accepts deposits may have balances due from the same financial institution from which it has accepted a deposit, also called reciprocal balances. Reciprocal account balances shall be offset if they will be offset in the process of collection or payment. Overdrafts of such accounts shall be reclassified as liabilities, unless the financial institution has other accounts at the same financial institution against which such overdrafts can be offset.
If deposits in other institutions are material, then deposits shall be presented as a separate amount in the balance sheet.