34 - Reporting Results

Question 1

List the important accounting concepts

Answer 1

1. Cost
2. Money measurement
3. Going concern
4. Business entity
5. Realisation
6. Accruals
7. Matching
8. Dual aspect
9. Materiality
10. Prudence
11. Consistency

Question 2

When analysing accounts, attention should be paid to…

Answer 2

1. Accounting rules, guidance and practice in the country.
2. Whether the accounts should be prepared on a going concern basis and should give a true and fair view.
3. Any changes in accounting practice.

Question 3

Outline what information can be found in the chairperson’s and CEO’s statements.

Answer 3

Successes, progress against key objectives and senior management changes.

Question 4

Outline the information in the investment report.

Answer 4

Investment strategies and performance.

Question 5

Outline the information in the strategic report

Answer 5

Progress against long and short-term strategic objectives.

Question 6

Outline the information in the risk report.

Answer 6

Attitude to risk, key risks faced, risk management approaches taken.

Question 7

Outline the information in the remuneration report.

Answer 7

Director’s pay, board attendance and turnover of directors.

Question 8

Outline the information in the corporate governance report.

Answer 8

Organisation of board and committee, independence of directors.

Question 9

Why is it important to comparatively analyse insurance company results?

Answer 9

Insurance business, especially short-term, is subject to cyclical effects.

Question 10

Give methods to analyse Insurance Accounts.

Answer 10

1. Expense ratio
2. Commission ratio
3. Operating ratio (Especially for short-term)
4. Ratio of outward reinsurance premiums to gross premium income.

Question 11

Why are benefit scheme reports unlike usual accounts published by companies?

Answer 11

Benefit schemes do not generate profits and losses and information is disclosed to beneficiaries in order to improve security.

Question 12

How does disclosure of financial position to beneficiaries in a benefit scheme improve the security of the scheme?

Answer 12

1. Improves transparency
2. Alerts members and trustees to potential problems
3. Provides members with the opportunity to leave the scheme if they are not happy with how it is being run and the benefits offered.

Question 13

Give the details that a disclosure by a benefit scheme to its members could include.

Answer 13

SCRIBE

Strategy for investment
Contribution obligations
Risks involved
Insolvency entitlement
Benefit entitlement
Expense charges

Question 14

Describe when disclosure to beneficiaries by a benefit scheme is usually required by regulation.

Answer 14

PRICE

Payment commencing
Request
Intervals
Combination
Entry

Question 15

Why is it common practice for benefit schemes to include disclosure about the financial significance of the existing benefit obligation to the company?

Answer 15

It is important that the company’s shareholders are made aware of these liabilities.

Question 16

Give the common aims that most accounting standards normally aim for with regards to benefit schemes.

Answer 16

1. Recognising the realistic costs of accruing benefits
2. Avoiding distortions resulting from fluctuations in the flow of contributions from the employer to the pension scheme.
3. Consistency in the accounting treatment from year to year.
4. Disclosure of the appropriate information.

Question 17

Give some possible disclosure requirements for benefit schemes.

Answer 17

1. Assumptions
2. Actuarial method
3. Value of liabilities accruing over the year
4. Increase in the past service liability over the year
5. Investment return achieved on the assets over the year
6. Surplus or deficit and the change in this figure over the year
7. Benefit cost over the year in respect of any directors.
8. Membership movements.