CASE STUDY ACCOUNTING POLICY DECISION Penny Ltd made the following disclosure in the notes to its financial statements about how it accounts for insurance premiums. Other current assets Insurance premiums are paid in advance and recognised as ‘Prepaid insurance’ asset at the time of settlement. ‘Other current assets’ includes an amount of $10 000, which represents the unexpired portion of the insurance contract. The expired portion of the insurance contract is recognised as an expense. Required 1. List the four components of an accounting policy decision. 2. Analyse Penny Ltd’s policy for accounting for the insurance premium in terms of each component. CASE STUDY