AIAF114 CHAPTER 1 EXAM QUESTIONS
WITH 100% CORRECT ANSWERS |
LATEST VERSION 2025/2026.
Generally Accepted Accounting Principles (GAAP) - ANS A common set of accounting
standards and procedures used in the preparation of financial statements to ensure consistency
of presentation and reported results.
Statutory Accounting Principles (SAP) - ANS The accounting principles and practices that are
prescribed or permitted by an insurer's domiciliary state and that insurers must follow.
The five basic assertions of accounting are that the financial information is: - ANS complete;
valued correctly; exists; belongs to the company and is properly classified, described and
disclosed.
Qualitative accounting information should meet the following criteria: -
ANS Understandability; Relevance; Reliability; Comparability and consistency; Lack of bias;
Cost-benefit effectiveness
Understandability - ANS to be understandable, information contained in financial reports
must be transparent, intelligible and clearly disclosed.
Relevance - ANS information must be timely, have predictive value, and provide useful
feedback about previously made decisions.
1 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, Reliability - criteria - ANS Representational faithfulness; Verifiability; Completeness;
Neutrality
Comparability and Consistency - ANS must allow for comparisons between time periods and
among entities and therefore must be consistent.
Lack of Bias - ANS can be misleading; only useful is users understand the bias; consistently
applied across time periods, firms, or industries.
Actuarial Standards of Practice (ASOP) 21 - ANS only the actuary "be aware of the bias".
Cost-Benefit Effectiveness - ANS cost of producing such information should be reasonable in
relation to the expected benefit of the information.
Comparing Relevance and Reliability - ANS a trade-off exists between the two; also affects
the valuation of difficult-to-estimate insurance liabilities.
Comparing Lack of Bias and Reliability - ANS conflict can arise between lack of bias and
reliability of information where uncertainty exists.
Accounting Frameworks - ANS Generally Accepted Accounting Principles;
Regulatory/Supervisory Accounting; Tax Accounting
Generally Accepted Accounting Principles GAAP - ANS for a broad range of users - investors,
creditors, owners
GAAP accounting typically focuses on - ANS value or performance of an organization as a
going concern.
2 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
WITH 100% CORRECT ANSWERS |
LATEST VERSION 2025/2026.
Generally Accepted Accounting Principles (GAAP) - ANS A common set of accounting
standards and procedures used in the preparation of financial statements to ensure consistency
of presentation and reported results.
Statutory Accounting Principles (SAP) - ANS The accounting principles and practices that are
prescribed or permitted by an insurer's domiciliary state and that insurers must follow.
The five basic assertions of accounting are that the financial information is: - ANS complete;
valued correctly; exists; belongs to the company and is properly classified, described and
disclosed.
Qualitative accounting information should meet the following criteria: -
ANS Understandability; Relevance; Reliability; Comparability and consistency; Lack of bias;
Cost-benefit effectiveness
Understandability - ANS to be understandable, information contained in financial reports
must be transparent, intelligible and clearly disclosed.
Relevance - ANS information must be timely, have predictive value, and provide useful
feedback about previously made decisions.
1 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, Reliability - criteria - ANS Representational faithfulness; Verifiability; Completeness;
Neutrality
Comparability and Consistency - ANS must allow for comparisons between time periods and
among entities and therefore must be consistent.
Lack of Bias - ANS can be misleading; only useful is users understand the bias; consistently
applied across time periods, firms, or industries.
Actuarial Standards of Practice (ASOP) 21 - ANS only the actuary "be aware of the bias".
Cost-Benefit Effectiveness - ANS cost of producing such information should be reasonable in
relation to the expected benefit of the information.
Comparing Relevance and Reliability - ANS a trade-off exists between the two; also affects
the valuation of difficult-to-estimate insurance liabilities.
Comparing Lack of Bias and Reliability - ANS conflict can arise between lack of bias and
reliability of information where uncertainty exists.
Accounting Frameworks - ANS Generally Accepted Accounting Principles;
Regulatory/Supervisory Accounting; Tax Accounting
Generally Accepted Accounting Principles GAAP - ANS for a broad range of users - investors,
creditors, owners
GAAP accounting typically focuses on - ANS value or performance of an organization as a
going concern.
2 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
