Review of the Financial Statements
- Accountants who are engaged to prepare financial statements for clients are required to adhere to the guidance issued in Statement on Standards for Accounting and Review Services (SSARS) No. 21. During a financial review, it is required to check that the client’s financial information is complete and consistent. By implementing good practices all year long, you can save yourself and your CPA firm from wasting time later on. If you’re not reconciling information on a regular basis, errors compound and it becomes harder to find the source of a problem.
Conversion to GAAP
- State insurance regulators require insurance companies to keep their accounting records for filing annual financial reports in accordance with statutory accounting principles (SAP). The Internal Revenue Service requires insurers to report their financial statements and tax returns in accordance with generally accepted accounting principles (GAAP). The primary difference between SAP and GAAP is in the way they record sales costs, unearned income, loss reserves, recoverable reinsurance payments, fixed assets, capital gains, bond recognition and accounting for surpluses. Under SAP, insurers report their income, expense, liabilities and net worth as if the company is about to be liquidated. Under GAAP, the IRS treats the company as a going concern. We reclassify costs and income, recognize assets and liabilities as per prescribed guidance to effective convert the existing accounting data to GAAP accounting.
Preparation of Consolidated Financial Statements
- Consolidated Financial Statements is the financial statements of the overall group which represents the sum total of its parents and all of its subsidiaries and includes all three key financial statements – income statement, cash flow statement and balance sheet. Consolidated Financial Statement depicts what a group of companies is heading toward. It gives a clear picture of the existing and potential investors about the company and its future.