Blanchard Accounting

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Blanchard Accounting
2010-09-11 09:49:52
Exam6 by Esaie

Exam6 by Esaie Blanchard Accounting
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  1. Purpose of accounting
    Provide information to the user so that he/she may perform analysis to form its own decision
  2. Accounting information should be
    • Understandable: transparent
    • Relevant: make a diff in user's decisions, should be timely, have predictive value, and provide useful feedback on past decisions
    • Reliable: dependable, include concepts of representational faithfulness, verifiability, completeness, neutrality
    • Comparable and consistent: must allow for comparison across time and competing interests
    • Unbiased: must avoid being misleading, either report unbiased or explain bias
    • Cost-benefit effective: cost of producing info should be reasonable
  3. Types of accounting
    • GAAP: focus as value as going concern; used by investors and creditors
    • SAP: statutory accounting; focus on liquidation mkt value (realizable value of assets); used by regulators
    • Tax: focus on social and political concerns; used by tax authorities
    • Management: focus on needs of management
  4. Principal financial reports
    • Balance sheet: list assets, liabilities, surplus
    • Income statement: reports income, expenses, earnings
    • Cash flow statement: reports sources and uses of cash
    • Notes and disclosures: allow for add'l info
  5. GAAP hierarchy
    • Organisation in charge of securities regulation
    • Standards set by specified account standars (IFRS)
    • Industry-specific guidance
    • Interpretations
  6. Fair value vs Historical cost
    • Fair value: amt for which an asset could be exchanged or a liability settled btwn knowledgeable, willing parties in an arm's lenght transaction
    • very relevant but less reliable
    • Historical cost: original cost of asset or liability
    • very reliable, but less relevant
  7. Deferral/matching vs asset/liability
    • Deferral/matching: coordinate timing of income and expense recognition to occur at same time; focus on timing of profit emergence
    • Asset/liability: focus on the value of assets or liabilities that exist as of balance sheet date
  8. Impairment
    Asset considered impaired if no longer expected to produce economic benefits expected when first acquired
  9. Common insurance accounts
    • Balance sheet assets
    • Premium receivable
    • Reinsurance recoverables
    • Deferred acquisition cost
    • Balance sheet liabilities
    • Policy liabilities
    • Unearned premium liability
    • Claim and claim expense liabilities
    • Insurance expense liabilities
    • Income statement accounts
    • Premiums, Losses, Loss expenses, UW expenses, UW income, PH dividends