Part 21 (Materiality) Flashcards
An item is considered material if it has an impact on what
the user’s decision or conclusion
When determining if something is material study:
- purpose (if its something in the annual statement, important, then it may be more material)
- intended users (board of directors would be serious, but just a team for analysis may not be as serious)
Materiality standards used in different practices are what
relatively consistent
Materiality standards by task are what
varied
The Actuary should select what type of standard for all aspects of a given task
constant
If an actuary is working on reserving, all steps in the reserving process should what
have a constant standard
Once a standard is selected, it should what?
Also what is an exception to this
Remain constant over the years
exception is if the insurer is approaching a particular threshold level, which it may be prudent to change the materiality standard.
Auditors/Accountants and Actuaries materiality standards
should select the same, if different then needs to be communicated to audience
When making disclosures what needs to be considered
- Sophistication of the user (is the user familiar with materiality, or would it be confusing?)
- Importance of the concept to the user (if important analysis, then user would be curious of what is a material amount. But if rough analysis, then may not make sense to discuss material standard)
When disclosure is not mandatory who is it up to if appropriate to disclose
The actuary
The materiality standards used in different what are relatively consistent, but materiality standards do vary by what?
practices
task
Materiality between Ho and WC lines should be what
similar
Materiality standard between setting reserves vs pricing, for WC is what
not necessarily as similar
What happens when standard is selected
Remains constant over the years
When is an exception to change a standard
when insurer is approaching a particular threshold in which case it may be important to change
