Financial Reporting Overview Flashcards
1
Q
financial reporting bases (4)
A
- Generally Accepted Accounting Principles (GAAP) - focused on measuring financial performance by matching revenues and expenses
- Statutory Accounting Principles (SAP) - prescribed by the NAIC for use by state regulators to monitor solvency
- tax - used to compute taxable income
- International Financial Reporting Standards (IFRS) - used in many countries outside the U.S.
2
Q
primary financial statements (4)
A
- balance sheet - presents assets and liabilities as of a specific point in time
- income statement - presents financial results (revenues and expenses) during a specific time period
- statement of capital and surplus - reflects changes in surplus that are not recorded in the income statement
- cash flow statement - recognizes actual cash flows
3
Q
liquidation vs going concern
A
- liquidation - viewing a company as a runoff, useful for regulators interested in satisfying policyholder obligations
- going concern - viewing a company as ongoing business, useful for investors
4
Q
fair value vs historical cost
A
- fair value - recording at a value it would be bought or sold for in the open market
- historical cost - recording at original purchase price minus depreciation
- trade-off between accuracy and verifiability
5
Q
principle-based vs rule-based
A
- principle-based - general guidance that must be interpreted and applied
- rule-based - specific guidance
- trade-off between adaptability and ease of use