SSAP 5: (NAIC) Liab, Contingencies, & Impairment of Assets Flashcards

1
Q

3 components of liabilities:

A
  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
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2
Q

Define “loss contingency”/ “asset impairment”:

A

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

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3
Q

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

A
  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
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4
Q

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

A
  • 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
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5
Q

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

A

The best estimate should be booked

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6
Q

Criteria to make a disclosure about loss contingency/ asset impairment:

A
  • 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 accrued
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7
Q

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

A
  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

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8
Q

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

A
  • 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 on the amounts 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
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