SSAPs Flashcards
three essential features of a liability [SSAP 5R]
- represents a present duty to transfer assets at a future specified date, on occurrence of a specified event, or on demand
- the duty obligates the entity, leaving it little discretion to avoid future sacrifice of economic benefits
- the event that obligates the entity has already occurred
describe joint and several liability arrangements [SSAP 5R]
more than one entity is obligated; report the amount the entity agreed to pay plus any amount they expect to pay on behalf of co-obligors
describe loss contingency or asset impairment [SSAP 5R]
an existing condition involving uncertainty as to possible loss that will be resolved when future events occur or fail to occur
two necessary criteria to charge loss contingency or asset impairment to operations [SSAP 5]
1) information prior to the issuance of the financial statements indicates that it is probable the assets have been impaired or liability incurred as of the financial statement date
2) amount can be reasonably estimated
required disclosures for liabilities, loss contingencies, impairment of assets [SSAP 5] (5)
- joint and several liability arrangements
- contingency or asset impairment that is reasonably possible but wasn’t recorded because only one of the two conditions were met
- reasonably possible exposure to loss higher than the amount accrued
- contingency involving a guarantee (e.g. guarantees of indebtedness of others), even if possibility of loss is remote
- gain contingencies, but do not overstate likelihood of the gain occurring
define subsequent events [SSAP 9]
events or transactions that occur:
- after the balance sheet date
- before the issuance of statutory financial statements
- before audited financial statements are issued or available to be issued
two types of subsequent events [SSAP 9]
Type I – Recognized Subsequent Events – additional evidence of conditions that existed at the balance sheet date
Type II – Nonrecognized Subsequent Events – evidence of conditions that arose after the balance sheet date
required disclosures for subsequent events [SSAP 9]
Type I: adjust financial statements; disclose adjustment only if necessary to keep the financial statements from being misleading
Type II: do not adjust financial statements; disclose the nature of the events and estimate of financial impact
when written premium is recorded for most contracts, and one exception [SSAP 53]
- record written premium on the policy effective date
* for work comp contracts with installment billing, record written premium to match billing frequency
when additional premium for endorsements or change in coverage is recorded [SSAP 53]
- record on the effective date of the change
two methods to recognize revenue evenly over the risk period [SSAP 53]
- daily pro rata method – calculate unearned premium on each policy by comparing elapsed days to days remaining
- monthly pro rata method – assume the same amount of business is written on each day of the month so the “mean” writing is at the middle of the month
how flat fee service charges for installment premium reported [SSAP 53]
as other income
accounting treatment of earned but unbilled premium (EBUB) [SSAP 53]
- prior to audit, estimate EBUB and record it as an adjustment to premium
- when the audit is complete and final premium is determined, earned premium adjustment is recognized immediately
determination of non-admitted EBUB [SSAP 53]
10% of EBUB in excess of collateral is nonadmitted
accounting treatment of advance premium [SSAP 53]
recorded as a liability and not considered income until due
how policies are grouped for calculating a premium deficiency reserve (PDR) [SSAP 53]
according to how they are marketed, serviced, and measured; deficiencies in one group cannot be offset by future profits in another group