SSAP 5

Question 1

3 components of liabilities

Answer 1

1. Present responsibility to transfer/use assets at a specified/determinable date based on the occurrence of a specified event/on demand
2. The entity has little/no discretion to avoid the responsibility
3. The transaction/event that obligates the entity has already occurred

Question 2

Define “loss contingency”/”asset impairment”

Answer 2

An existing condition involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur

Question 3

2 necessary criteria to charge a loss contingency/asset impairment to operations

Answer 3

1. Information prior to the issuance of the financial statements indicates that the assets has been impaired/liability incurred at the date of the financial statements
2. The amount of the loss can be reasonably estimated

Question 4

How should management book the reserve if there is a range?

Answer 4

• If a particular amount within the range appears to be a better estimate, that amount should be booked
• If no amount in the range appears to be better than the others, the midpoint should be booked

Question 5

How should management book the reserve if there is no range?

Answer 5

The best estimate should be booked

Question 6

Criteria to make a disclosure about loss contingency/asset impairment

Answer 6

• A contingency/asset impairment is not recorded because only one of the two conditions is met
• There is an exposure to loss higher than the amount accured

Question 7

2 disclosures that need to be made regarding loss contingency/asset impairment

Answer 7

1. Nature of the contingency

2. Estimate of the possible loss/range of loss; or a statement that such an estimate can not be made

Question 8

Disclosures that the insurer needs to make if the contingency involves a guarantee

Answer 8

• Nature & amount of the guarantee
• Approximate term
• How the guarantee arose
• The events that would require the guarantor to perform under the guarantee
• The current status

Question 9

Disclosures that need to be made for each joint & several liability arrangement

Answer 9

• Nature of the agreement
• Total outstanding amount under the arrangement
• Carrying amount of the insurers liability, and carrying amount of the receivable recognized
• Nature of any recourse provisions that would enable recovery from other entities of the amounts paid, including any limitations of the amount that may be recovered
• In the period where the liability was initially recognized & measured, or the period in which the measurement changes significantly: the corresponding entry/where the entry was recorded in the financials