34. Reporting results TODO

Question 1

What are the changes of the accounting system in recent years?

Answer 1

• Shift from a prudent to a more neutral basis
• Trading companies shift from historical cost to fair value

Question 2

What does it mean to prepare accounts using market values?

Answer 2

• Revaluing A and L
• At the end of each accounting period
• Gains + losses of each revaluation => Included on the IS
• Consequence=> volatile results if A and L do not move consistently
• List 11 accounting principles
• Cost
• Money measurement
• Going concern
• Business entity
• Realisation
• Accruals
• Matching
• Dual aspect ix. Materiality
• x. Prudence xi. Consistency

Question 3

What important things should be considered when analysing accounts?

Answer 3

• Strength of the basis used
• Impact of business growth
• Statutory and accounting rules of the jurisdiction
• Usually=> going concern + 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

Question 4

What additional reports might accompany accounts?

Answer 4

• CIRCUS
• Chairperson/CEOs statement
• Investment report
• Remuneration report
• Corporate governance report
• Uncertainty/risk report
• Strategic report

Question 5

What accounting ratios might be used in analysing the performance of a general insurance company?

Answer 5

• Incurred expenses: premium income
• Commission: premium income
• Operating ratio
• Outward reinsurance premium: gross premium income

Question 6

Why is disclosure of information to scheme beneficiaries as well as to sponsors and scheme managers important?

Answer 6

• 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

Question 7

8) When might discloures to beneficiaries be required?

Answer 7

• PRICE
• Payment commencement
• Request
• Intervals
• Combination
• Entry

Question 8

What information may be disclosed to members of a benefit scheme?

Answer 8

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

Question 9

What are the common aims of the worldwide accounting standards?

Answer 9

• 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

Question 10

What items might the owners of benefit providers be required to disclose in accounts?

Answer 10

• 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
• Chapter 35 Insolvency and closure