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

Limited Time Offer

25%

Off

Get Premium AHM-520 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Pearline

5 days 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!

upvoted 0 times

...

Claudia

17 days 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.

upvoted 0 times

...

Simona

24 days 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.

upvoted 0 times

...

Germaine

26 days ago

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

upvoted 0 times

...

Selma

29 days 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.

upvoted 0 times

...

Theron

1 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.

upvoted 0 times

Iluminada

8 days ago

User 2: Yeah, it would help match the expense with the revenue generated.

upvoted 0 times

...

Ronald

13 days ago

User 1: I agree, option B does seem like the best approach.

upvoted 0 times

...