CAS Data Insurance Series Courses – Insurance Accounting (DISC IA) Practice Test 2025 - Free Insurance Accounting Practice Questions and Study Guide

The process of ensuring that income and expenses are recognized in the same period is aligned with the principle of matching, which is integral to accrual accounting. This is fundamental to accurately reflecting a company's financial performance in any given period.

The deferral-matching concept specifically refers to delaying the recognition of certain revenues and expenses until the period in which they are earned or incurred. This principle is crucial for presenting a true and fair view of financial results. By following this process, companies can avoid mismatching revenues and expenses, which could distort financial reporting and mislead stakeholders regarding profitability within specific reporting periods.

In contrast, impairment testing involves evaluating whether the carrying amount of an asset exceeds its recoverable amount, affecting asset values but not directly relating to the timing of income and expense recognition. Revenue recognition deals with when revenue is earned and recorded but does not directly pertain to the matching of expenses with that income. Asset-liability matching refers to aligning asset levels with associated liabilities but does not specifically address the recognition timing of revenues and expenses.

Thus, the deferral-matching process is the appropriate answer as it directly addresses the core accounting principle of matching expenses with the revenues they help generate within the same reporting period.