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)
Loading flashcards...
1
Q

Purpose of financial reporting

A

Communicate financial results to stakeholders

2
Q

Accounting principles prescribed by the State Regulators

A

Statutory Accounting Principles (SAP)

3
Q

Main reason that SAP rules are conservative

A

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

4
Q

Primary users of Generally Accepted Accounting Principles (GAAP):

A

Investors

5
Q

Main objective of GAAP:

A

Present results that closely measure the financial performance during a period

6
Q

Describe the balance sheet

A

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

7
Q

Describe the income statement

A

Shows the financial results (income) earned during a period

8
Q

Describe the Capital and Surplus exhibit

A

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

9
Q

Describe the Cash Flow Statement

A

Shows the cash flows into and out of the firm

10
Q

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

A

GC: Investors
L: Regulators

11
Q

Compare Fair Value to Historical Cost

A

Fair Value: value it can be traded at in the open market

Historical cost: purchase price less depreciation

12
Q

List an advantage of Fair Value and one for Historical Cost

A

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

13
Q

Compare principles to rules, including their respective advantages

A

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