TIA Section A - NAIC SSAPs - SSAP 5

Question 1

definition of liabilities
3 characteristics

Answer 1

1️⃣ Present responsibility to transfer/use assets at a specified determinable date based on the occurrence of a specified event on demand

2️⃣ The entity has little or no discretion to avoid the responsibility

3️⃣ The transaction/event that obligates the entity has already occurred

Question 2

Define loss contingency/asset impairment

Answer 2

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

Question 3

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

Answer 3

1️⃣ Information prior to financial statement issuance indicates that the assets has been impaired/liability incurred at the date of the financial statements

2️⃣ The amount of the loss can be reasonably estimated

Question 4

How should management book the reserve if there is a range

Answer 4

🔸If an amount in the range is a better estimate, book that

🔹If no amount in the range is better, book the midpoint

Question 5

How should management book the reserves if there is no range

Answer 5

The best estimate should be booked

Question 6

Criteria to make a disclosure about loss contingency/ asset impairment

Answer 6

🔵 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 accrued

Question 7

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

Answer 7

✔️ Nature of the contingency

✔️ Estimate of the possible loss or range of loss. Or a statement that such an estimate can not be made

Question 8

Examples of disclosures for each joint and several liability arrangement

Answer 8

🏔 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 on the amounts that may be recovered

[Not in TIA Study:]
🔴 In the period where the liability was initially recognized and measured or the period in which the measurement changes significantly: the corresponding entry where entry was recorded in the financials