Mandy Ltd made the following disclosure in the notes to its financial statements about how it accounts for insurance premiums:

Required 1. List the four components of an accounting policy decision.
2. Analyse Mandy Ltd's policy for accounting for the insurance premium in terms of each component.

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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 $10000, which represents the unexpired portion of the insurance contract. The expired portion of the insurance contract is recognised as an expense.