Fall 2018 Q10
For part c sub-part i
This is a Type 1 event, which means it should be included in the Balance Sheet already.
It went from being a non-admitted Asset (past due > 90 days) to being collected. I assume that becomes a Cash Asset (which is admitted). So then shouldn't Surplus increase by 100?
Comments
This was a little tricky. The second sample answer about the $100 being immaterial is probably the simplest explanation. Since the amount is immaterial, it doesn't need to be reflected in the 2017 financial statements, but rather it is reflected in the 2018 financial statements.
But, even if the amount were material, there is a paragraph from NAIC-SSAP-9 that actually prohibits reflecting the reclassification of agents' balances:
I think they were specifically testing you on the idea of materiality and/or the rather obscure paragraph from SSAP-9.
Woah, OK. This exam means business.
Thanks.
Oh yes! But here are a few things to consider:
When you consider all these things, I wouldn't worry too much about this one question. There will be questions like this on every exam. I don't think it's reasonable to expect you to memorize an obscure paragraph with this chapter. There are a lot of other areas that we KNOW will be tested (like the SAO and IRIS ratios) so if you really know those topics well, you should be fine. It won't sink you even if you completely miss 3 or 4 points on the actual exam.
Hope that helps put your mind at ease. You still have to study A LOT however, but if you do the right things, you'll be fine.
Yes, true. My head is spinning from 2 weeks of Balance Sheet and Income Statement. When you're knee-deep, you can't tell a main idea from a rabbit hole.
It'll sink in.
Right, your perspective broadens as you work through the various readings. You'll begin to get a better sense of what's important what is less so as you get further along.