Accounting and Reporting for Contribution

Conventional insurance contribution is the premium paid to the insurance company in

exchange of bearing all expected risks. In contrast, Takaful contribution is the revenue to the
Takaful fund which is paid by the participants based on the concept of tabarru (donation). In
term of the disclosure of contributions, both AAOFI and GPT 6 have similar requirements
which are to disclose in Takaful funds revenue account.
In the statement of comprehensive income for general and family Takaful should have the
amounts of gross contributions which must be deducted by the amount of retakaful to arrive
to net earned contributions. To arrive to the conclusion whether there are surplus or deficit of
the Takaful funds on that particular period, the net contributions are deducted to all net claims
incurred, wakalah fees and commissions earned.
In the statement of financial position of the Takaful operators, the unearned contributions
reserves (UCR) should be reported. The UCR is considered as liability to the Takaful
company as it represents the portion of net contribution income that relate to the next
financial period. In the notes of financial statement, Takaful operator is required to disclose
the amount of gross contributions and calculation done to derive to the amount of net earned
contributions.
Based on the analysis done on Etika Takaful Berhad and Bahrain International Takaful annual
report 2015, it is found that both operators disclosed amounts of gross and net contributions
in Family Takaful revenue account and General Takaful accounts in the statement of
comprehensive income and notes to financial statements. However in term of the UCR
information, only Bahrain International Takaful disclosed the information in its statement of
financial position and the notes while the Etika Takaful Berhad did not disclosed any
information on it.