Forgive me for my financial illiteracy but I struggle to understand their revenue recognition model. The two revenue line items: Trail Commission/Adminfees are (I) commissions and fees received over the life of the policies as premiums are paid by customers for Freedom Products as well as for third party products sold via Spectrum. Freedom becomes entitled to these commissions once the initial sale of the policy has been completed; and (ii) administration fees received for ongoing servicing of policies administered by Freedom. Trail Asset Movement shows the movement in the Trail Asset. The Trail Asset is determined as the present value of future Trail Commissions using a discounted cashflow approach. The Trail Asset values entitlements for both Freedom Products and third party products sold via Spectrum. Deductions are made from the Trail Asset for payments by Spectrum to advisers, so as not to overstate the value of the Trail Asset (see Section 4.3.3).
If they are recognising trail commission on an NPV basis rather than on the basis of actual payments received under the Trail Asset Movement revenue line item then why is there another revenue line item under Trail Commission/Admin fees. If this is recognising commisions over the life of the policies than isn't that double dipping ?
FIG Price at posting:
53.0¢ Sentiment: None Disclosure: Not Held
