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Flashcards in SSAP 5 Deck (9)
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3 components of liabilities

1. Present responsibility to transfer/use assets at a specified/determinable date based on the occurrence of a specified event/on demand
2. The entity has little/no discretion to avoid the responsibility
3. The transaction/event that obligates the entity has already occurred


Define "loss contingency"/"asset impairment"

An existing condition involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur


2 necessary criteria to charge a loss contingency/asset impairment to operations

1. Information prior to the issuance of the financial statements indicates that the assets has been impaired/liability incurred at the date of the financial statements
2. The amount of the loss can be reasonably estimated


How should management book the reserve if there is a range?

-If a particular amount within the range appears to be a better estimate, that amount should be booked
-If no amount in the range appears to be better than the others, the midpoint should be booked


How should management book the reserve if there is no range?

The best estimate should be booked


Criteria to make a disclosure about loss contingency/asset impairment

-A contingency/asset impairment is not recorded because only one of the two conditions is met
-There is an exposure to loss higher than the amount accured


2 disclosures that need to be made regarding loss contingency/asset impairment

1. Nature of the contingency
2. Estimate of the possible loss/range of loss; or a statement that such an estimate can not be made


Disclosures that the insurer needs to make if the contingency involves a guarantee

-Nature & amount of the guarantee
-Approximate term
-How the guarantee arose
-The events that would require the guarantor to perform under the guarantee
-The current status


Disclosures that need to be made for each joint & several liability arrangement

-Nature of the agreement
-Total outstanding amount under the arrangement
-Carrying amount of the insurers liability, and carrying amount of the receivable recognized
-Nature of any recourse provisions that would enable recovery from other entities of the amounts paid, including any limitations of the amount that may be recovered
-In the period where the liability was initially recognized & measured, or the period in which the measurement changes significantly: the corresponding entry/where the entry was recorded in the financials