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.
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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
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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
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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
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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
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