34. Reporting results Flashcards
What are the changes of the accounting system in recent years?
- Shift from a prudent to a more neutral basis
- Trading companies shift from historical cost to fair value
What does it mean to prepare accounts using market values?
- Companies have used market values of assets for years
- Revaluing A and L
- At the end of each accounting period
- Gains + losses of each revaluation => Included on that period’s income statement
- Consequence=> volatile results if A and L do not move consistently
What important things should be considered when analysing accounts?
7
- Strength of the BASES used
- Impact of business growth
- Statutory and accounting rules of the jurisdiction
- Usually=> prepared on going concern + true and fair value basis
- Changes in the Acc practice over the last year=> effect of these changes
- Reports accompanying accounts
- Effect of underwriting cycle on the insurance company=> Compare against similar businesses
What additional reports might accompany accounts?
6
CIRCUS
- Chairperson/CEOs statement
- Investment report
- Remuneration report
- Corporate governance report
- Uncertainty/risk report
- Strategic report
What accounting ratios might be used in analysing the performance of a general insurance company?
4
- Incurred expenses: premium income
- Commission: premium income
- Operating ratio (claims+expenses:premium)
- Outward reinsurance premium: gross premium income
List two financial indicators that might be considered when analysing a bank’s financial position, in relation to its loan portfolio
- Probability of default
- Loss given default
Why is disclosure of information to scheme beneficiaries as well as to sponsors and scheme managers important?
SIMMERS
- Sponsor is aware of financial significance of benefits
- Informed decisions can be made
- Mis-selling (misleading beneficiaries) is avoided
- Manages the expectation of members
- Encourages take up
- Regulatory requirement
- Security of scheme improved as sponsor/ trustees are made more accountable
When might discloures to beneficiaries be required?
PRICE
- Payment commencement
- Request
- Intervals
- Combination
- Entry
What information may be disclosed to members of a benefit scheme?
SCRIBE
- Strategy for investment
- Contribution obligations
- Risks involved
- Insolvency element
- Benefit entitlements
- Expense charges
What are the common aims of the worldwide accounting standards?
CARD
- Consistency in the accounting treatment from year to year
- Avoiding distortions resulting from contribution fluctuations
- Recognising the realistic costs of accruing benefits
- Disclosure of appropriate information
What items might the owners of benefit providers be required to disclose in accounts?
DIM CLAIMS
- Directors benefit costs over the year
- Investment returns on assets achieved over the year
- Membership movements
- Change in the surplus/deficit over time
- Liabilities accruing over the year
- Assumptions used
- Increase in the past service liabilities over the year
- Methods used
- Surplus/deficit
