Which option describes the non-admitted EBUB rule?

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Multiple Choice

Which option describes the non-admitted EBUB rule?

Nonadmitted asset treatment in this context is about conservatism: amounts that aren’t readily collectible should not be fully included in admitted assets. For EBUB (earned but unbilled revenue) where the amount exceeds what collateral can support, only a small portion can be admitted because the risk of noncollectibility remains. The rule specifies that only 10% of EBUB in excess of collateral may be admitted, and the remainder that is not collectible is written off. Collateral reduces risk, so a limited portion beyond collateral is allowed to improve the asset picture, but without strong certainty of collection, most of that excess stays nonadmitted and any uncollectible part is removed from assets. That’s why the described approach is the best fit: a modest admitted amount (10% of the excess) with the uncollectible portion written off. The other options would either overstate recoverable value (admitting 50% or 100%) or claim EBUB can’t be nonadmitted, which isn’t consistent with prudent asset recognition.

Nonadmitted asset treatment in this context is about conservatism: amounts that aren’t readily collectible should not be fully included in admitted assets. For EBUB (earned but unbilled revenue) where the amount exceeds what collateral can support, only a small portion can be admitted because the risk of noncollectibility remains.

The rule specifies that only 10% of EBUB in excess of collateral may be admitted, and the remainder that is not collectible is written off. Collateral reduces risk, so a limited portion beyond collateral is allowed to improve the asset picture, but without strong certainty of collection, most of that excess stays nonadmitted and any uncollectible part is removed from assets.

That’s why the described approach is the best fit: a modest admitted amount (10% of the excess) with the uncollectible portion written off. The other options would either overstate recoverable value (admitting 50% or 100%) or claim EBUB can’t be nonadmitted, which isn’t consistent with prudent asset recognition.

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