Ch 34: Reporting results Flashcards
List the important accounting concepts (11)
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
When analysing accounts, attention should be paid to…?
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 value.
3) Any changes in accounting practice
Outline what information can be found in the Chairperson’s and CEO’s statements
1) Success of the year
2) Progress against key objectives
3) Senior management changes
4) Exceptional events
Outline the information in an investment report
- Investment strategies and performance
Outline the information in the Strategic report
1) Long and short-term strategic objectives
2) Progress against long- and short-term strategic objectivves
Outline the information in the risk report
1) Attitude to risk
2) Key risks faced
3) Risk management approaches taken
Outline the information in the Remuneration report
1) Director’s pay (exec and non-exec)
2) Board meetings attendance
3) Turnover of directors
Outline the information in the Corporate governance report
1) Organisation of board and board committee
2) Statements on how the board assured itself of independence
Why is it important to comparatively analyse Insurance company results?
Cyclical effects may affect many providers at more or less the same time.
Therefore compare insurer’s profitability with that of similar insurers.
What are the benefits of accounting ratios
1) Expense ratio
2) Commission ratio
3) Operating ratio
4) Ratio of outward reinsurance premiums to gross premium income
1) Expense ratio
- Efficiency of company in managing expenses relative to revenue
- Investor confidence (lower expense ratio boosts investor confidence)
2) Commission ratio
- Revenue analysis, of commission to premium income (higher is better)
- Sales strategy evaluation
3) Operating ratio
- Efficiency analysis. Lower means able to generate more profits
- Investor confidence & financial health
4) Ratio of outward reinsurance premiums to gross premium income
- Risk management
- Capital management
**All
- Comparison with industry benchmarks and competitors
- Give a quick, limited indication of an insurance company’s financial position
- Can compare them with previous years
- May be useful to consider ratios before and after reinsurance
Why are benefit scheme reports unlike usual accounts published by companies?
Benefit schemes do not generate profits and losses and information is disclosed to beneficiaries in order to improve security
How does Disclosure of financial position to Beneficiaries in a Benefit scheme improve the Security of the scheme
1) Improves transparency and scrutiny.
2) Alerts members and trustees to potential problems, possible enabling them to put pressure on the scheme sponsor to address these potential problems.
3) Provides members with the opportunity to leave the scheme if they are not happy with how it is being run, benefits offered, and level of security. If members did this in sufficient numbers, the sponsor may respond by addressing the security issue.
List disclosure details for beneficiaries of a scheme.
1) Benefit entitlements
2) Contribution obligations
3) Expense charges
4) Investment strategy
5) Risks involved
6) Treatment of entitlements in the event of insolvency
Describe when disclosure to beneficiaries by a benefit scheme is usually required by regulation.
1) On entry
2) At regular intervals
3) Once payments commence
4) On request
5) A combination of the above
Why is it common practice for benefit schemes to include disclosure about the financial significance of the existing benefit obligation to the company?
It is important that the company’s shareholders are made aware of these liabilities
