A1. Odomirok 1 to 5 Flashcards Preview

TIA Exam 6 > A1. Odomirok 1 to 5 > Flashcards

Flashcards in A1. Odomirok 1 to 5 Deck (13):
1

Purpose of financial reporting

Communicate financial results to stakeholders

2

Accounting principles prescribed by the State Regulators

Statutory Accounting Principles (SAP)

3

Main reason that SAP rules are conservative

Main focus of the regulators is to ensure that the policyholders will be protected

4

Primary users of Generally Accepted Accounting Principles (GAAP):

Investors

5

Main objective of GAAP:

Present results that closely measure the financial performance during a period

6

Describe the balance sheet

Shows the assets and liabilities as of a certain point in time

7

Describe the income statement

Shows the financial results (income) earned during a period

8

Describe the Capital and Surplus exhibit

Lists those transactions that impact surplus, but which are not included on the income statement

9

Describe the Cash Flow Statement

Shows the cash flows into and out of the firm

10

List a party that would take a "liquidation" view of insurer and one that would take a "going concern" view

GC: Investors
L: Regulators

11

Compare Fair Value to Historical Cost

Fair Value: value it can be traded at in the open market
Historical cost: purchase price less depreciation

12

List an advantage of Fair Value and one for Historical Cost

Historical cost is more reliable (objectively verifiable), but fair value is often more accurate (consistent with actual market value).

13

Compare principles to rules, including their respective advantages

Principle: a general accounting approach that the users need to interpret
Rule: specific guidance that users need to follow. The rules are easier to interpret, but the principles are more adaptable to changes