The population projection uses actual resident data to develop future assumptions about demographic characteristics of existing members. To calculate the liabilities, we project existing members through various levels of care until move-out / death. The rates of population movement utilized in these population projections are developed based on a review of the demographic experience of your program and the Continuing Care Actuaries demographic database for At Home members.
The population assumptions are then used to develop a closed group population projection that reflects only the activity of the current group of members. A closed group does not have any new members entering the program, so as members die or voluntarily withdraw the projected group size declines. Closed group projections can be used to anticipate individual revenues and expenses over the life of the group. The population projections form the basis of the financial projection that is prepared for the obligation calculation as recommended by the AICPA.
We will combine the results of our population projection with projected revenues and projected expenses for your program to develop the net present value of future cash outflows.
This value, together with unamortized deferred revenue, unamortized costs of acquiring the initial continuing-care contracts, and allocable depreciation, produces the amount of the Obligation.
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