AHIP AHM-520 Exam - 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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Youlanda

5 months ago

D is the classic example of systematic allocation, right?

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Francis

5 months ago

Wait, can you really spread utility bills like that? Seems odd.

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Howard

6 months ago

I thought immediate recognition was more common for these expenses?

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Christoper

6 months ago

Definitely B! Spreading commissions makes total sense.

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Brandon

6 months ago

Systematic allocation is key for matching expenses to revenues.

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Penney

6 months ago

I feel like option D makes sense for depreciation, but I’m not confident if that’s the only one that fits the systematic allocation approach.

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Peter

7 months ago

I’m a bit confused; I thought immediate recognition was more common for utility bills, but maybe systematic allocation applies to other expenses?

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Jolanda

7 months ago

I remember a practice question where we discussed how commissions should be allocated over the coverage period, so I’m leaning towards option B.

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Erasmo

7 months ago

I think the systematic and rational allocation approach is about spreading costs over time, but I'm not sure which option fits best.

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Precious

7 months ago

I feel pretty confident on this one. The systematic and rational allocation approach is used to spread out expenses that have a clear link to the revenue they help generate, like sales force commissions. That seems like the best fit for the health plan scenario.

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Donte

7 months ago

Hmm, I'm a bit confused on the differences between the three expense recognition approaches. I'll need to review my notes to make sure I understand when each one is appropriate.

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Brittni

7 months ago

This question seems straightforward. I think the systematic and rational allocation approach would be used to spread the payment of sales force commissions over the premium paying period of healthcare coverage.

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Basilia

7 months ago

The key here is that the question is asking about a health plan, so I'm guessing the systematic and rational allocation approach would be used for things like reporting fees paid to attorneys and consultants, since those expenses are ongoing and should be matched to the revenue they help generate.

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Blair

7 months ago

Okay, I've got this. DHCP is all about automatically configuring network settings, so it can definitely handle the IP address, gateway, and DNS server. The operating system is a bit of a curveball, though.

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Lea

7 months ago

Hmm, I'm a bit confused. Do I want to disable all macros or just the unsigned ones? I'll need to think this through carefully.

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Emile

7 months ago

Okay, I think I've got it. The log-input keyword is causing the console to receive the log messages, so removing that or replacing it with just 'log' should do the trick.

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Angelica

7 months ago

Okay, let's think this through step-by-step. I believe the key is to properly set up the parent/child relationships between the main accounts and subaccounts, and assign the appropriate percentages.

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Carry

12 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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Tayna

10 months ago

Cecily: Exactly, why pay everything upfront when you can spread it out?

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Tammara

11 months ago

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

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Cecily

11 months 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

11 months ago

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

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Helga

12 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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Javier

10 months ago

It's all about following the rules, even if it's not the most convenient option.

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Judy

11 months ago

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

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Catarina

11 months ago

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

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Pearline

1 year 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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Wendell

11 months ago

User 3: Yeah, it's important for accurate financial reporting.

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Simona

11 months ago

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

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Sonia

11 months 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

1 year 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

11 months ago

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

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Clare

11 months ago

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

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Patrick

11 months ago

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

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Tayna

11 months ago

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

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Lashawn

11 months ago

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

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Amalia

12 months ago

User 1: I think B is the best choice.

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Annmarie

12 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

1 year 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

1 year ago

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

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Selma

1 year 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

1 year 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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