Investments Held at Amortized Cost by Life Insurance Enterprises

C

In general, life insurance companies hold various types of investments as part of their overall investment portfolio. These investments can be categorized based on the underlying assets, such as equities, bonds, or real estate, as well as based on the investment duration, such as short-term or long-term investments.

The carrying value of these investments in the balance sheet of a life insurance enterprise can be calculated based on the accounting treatment applied to them. One of the accounting treatments commonly used for investments is the amortized cost method.

Under the amortized cost method, investments are initially recorded at their fair value, and then adjusted over time to reflect the amortization of any premiums or discounts associated with the investment, as well as any interest or principal payments received. The carrying value of the investment in the balance sheet is adjusted accordingly.

Out of the given options, the type of investment that is typically carried in the balance sheet at amortized cost is the Fixed-term portfolio (Option C). Fixed-term portfolios generally consist of fixed-income investments, such as bonds or notes, that have a fixed term or maturity date. These investments are usually held until maturity and generate a predictable stream of income over the term of the investment.

On the other hand, the other options listed in the question are not typically carried in the balance sheet at amortized cost:

• Appraisal-term assets (Option A) are investments that are carried in the balance sheet at their fair value. These assets are revalued periodically to reflect any changes in market conditions.
• Variable-term portfolios (Option B) usually consist of equity securities and are carried in the balance sheet at fair value. These investments are subject to changes in market conditions, and the carrying value in the balance sheet reflects these changes.
• Revenue-earned portfolios (Option D) are not typically classified as investments, but rather as part of the company's revenue stream. These portfolios may include products like annuities or other insurance products, which generate income for the company over a specified period.

In summary, the correct answer to the question is Option C, as fixed-term portfolios are typically carried in the balance sheet at amortized cost. The other options listed in the question are carried in the balance sheet using different accounting treatments.