Odomirok Chapters 1-5 Flashcards

Flashcards covering key vocabulary and concepts from Odomirok Chapters 1-5, focusing on accounting frameworks, financial statements, and valuation methods.

Statutory Accounting (SAP) & GAAP Accounting (GAAP)

Accounting frameworks used by insurers to produce financial statements.

Balance Sheet

A financial statement that shows the assets and liabilities of a firm at a specific point in time.

Assets

Resources controlled by the insurer that have a probable future economic benefit

Liabilities

Probable sacrifices of economic benefits due to present obligations as a result of past events

Equity

Difference between assets and liabilities; also referred to as surplus

Income Statement

A financial statement showing the income earned during a period.

Revenues

Inflows/enhancements of assets/settlements of liabilities

Expenses

Outflow of assets/incurrence of liabilities

Capital & Surplus

Financial statement that provides transactions impacting surplus, but not included in the income statement.

Cash Flow

Financial statement that shows the cash flows into and out of the firm.

Notes to the Financial Statements

Quantitative and qualitative disclosures elaborating on elements from the financial statements.

Fair Value

Valuation based on the value it can be traded at in the open market.

Historical Cost

Valuation based on the purchase price less depreciation.

Principle-Based Accounting

A general accounting approach that the users need to interpret.

Rule-Based Accounting

Specific guidance that users need to follow.

The National Association of Insurance Commissioners (NAIC)

Organization of regulators that coordinates governance of insurers. NAIC adopted Codification of SAP, which requires that insurers across the country follow the same SAP rules.