Service to be provided:

Pinnacle consultants can assist you in identifying and determining the net present value of those liabilities that require an accrual in accordance with SOP 87-1 (Accounting for incurred-But-Not-Reported Liabilities) and FAS-5.

Why should such a service be considered?

In accordance with the aforementioned accounting pronouncements, you are required to maintain an accrual for self-funded liabilities. Our experience has been that many times a firm is not aware of this accounting requirement. In many instances it does not pose a problem for the size of the liability is considered immaterial. However, on occasion, we have seen clients who have not analyzed these liabilities on a regular basis, and as a result they become material and an accrual is now required by external accountants. Failure to do so can result in not only a reduction in year-end earnings, but also a qualified opinion.

Pinnacle recommends that our clients identify all of its self-funded liabilities, and continuously monitor the aggregate outstanding value to determine when an accrual might be appropriate. Such self-funded liabilities could be those areas where a conscious decision was made to self-insure, amount in excess of available policy limits, deductibles, and uninsured claims.