Part 1 (Odomirok 1-5)

Question 1

Stakeholders

Answer 1

Any party that has an interest in the company

Question 2

Financial Reports

Answer 2

Help stakeholders make decisions by looking at tracked performance

Question 3

Accounting Framework

Answer 3

Two main ones:
- SAP: Statutory, more for regulators
- GAP: More for Investors

Question 4

Codification

Answer 4

Initiative for companies around the country to use same SAP rules

Question 5

Main Financial Statements

Answer 5

Balance Sheet (@ end of year surplus, etc..)
Income Statement (during the year profit, etc…)
Capital & Surplus
Cash Flow (less important for insurance companies)
Notes to Financial Statements

Question 6

Liquidation vs Going Concern

Answer 6

Liquidation: Regulators take this approach to make sure company has sufficient funds to pay policyholders (SAP)
Going Concern: Investors take this approach, assuming the company will continue to operate, to accurately measure performance

Question 7

Fair Value vs Historical Cost

Answer 7

Fair Value: Market value
Historical Cost: Original Cost of Asset

Question 8

Principle based vs Rule Based

Answer 8

Principles: Need judgment & Responsive to Change
Rules: Ridged & Easy to Interpret