Chapter 34 - Financial Reporting Flashcards

1
Q

For this chapter should be able to do the following for the exam:

A

Be familiar with accounting concepts and principles

Comment sensibly on conclusions that can be drawn from analysing a simple set of accounts
- Highlight possible reasons for results, e.g. strength of basis or business growth etc.

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2
Q

For this chapter only expected to:

  • Discuss problems that arise in defining accounting concepts and principles
  • Roughly understand how to put these principles into practice
  • Understand implications of reporting principles and concepts for interpretation of accounts
A

Do not need to know specific rules

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3
Q

Discuss the reporting standards for insurers in SA.

A

Mostly public companies

Preparation of financial statements

  • IFRS or GAAP
  • True and fair view
  • Comparitives

Also use other reports

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4
Q

Briefly outline some of the information contained in reports accompanying the financial accounts.

A

Chairperson’s and CEO statements
- Might give details of successes of the year (typically less will be said about failures)
- Report of performance against key objectives
- Changes at board and senior management level
- Idea of if company is flourishing or not
- Information on extraordinary events during the period:
> merger or acquisitions
> internal restructures
> unusual claims experience
> exceptional expenditure (e.g. during periods of growth)

Investment report

  • Summary of investment strategy and performance
  • Commonly included within another report

Strategic report

  • Refers to company’s long and short-term strategic objectives
  • Report how progress has been made or success has been achieved
  • Report performance against key indicators

Risk report

  • Attitude to risk
  • Key risk exposures
  • Risk management and mitigation strategies
  • Could be included in other report

Remuneration report

  • Salaries and bonuses for executive and non-executive directors
  • Attendance at board meetings
  • Turnover of directors
  • Last 2 can be indication of state of the company

Corporate governance report

  • Describe how company is organised in terms of board and board committees
  • Statements of how board assures itself of independence
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5
Q

List some of the important accounting ratios to be considered when looking at the accounts of insurance companies.

A

Incurred expenses to premium income
- Would normally excluded exceptionally large expenses

Commission to premium income

Operating ratio

  • Total incurred (i.e. excluding IBNR) claims and expenses to premium income
  • Used more for short-term classes of business (Why? see question p. 8)

Reinsurance premium payments to gross premium income

  • Care is needed when looking at high level analyses’ such as this
  • Should look at possible explanations for ratio values before drawing conclusions
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