The unearned premium reserve may have multiple roles under a deferral-matching accounting system. It may be viewed as a reflection of the refund liability in the event of policy cancellation10 . It may also be viewed as a way of deferring revenue so that revenue timing matches expense. These two views may result in different values, such as when a penalty would be charged the policyholder for early policy cancellation, although in practice such differences are generally ignored. Ideally the accounting system will clarify which view to use in quantifying the unearned premium reserve when the two.
