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ch 6
loma
40
Finance
Professional
11/20/2011
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Term
accrued income.
 Definition
For bond interest, the amount of interest that has been earned
on a bond, but is not yet payable to the bondholder as of the financial reporting date.
Term
admitted assets.
 Definition
Assets for which the full value may be reported on the Assets
page of a life insurance company’s U.S. Annual Statement.
Term
American Institute of Certified Public Accountants (AICPA).
 Definition
A professional
association of U.S. Certified Public Accountants (CPAs) that directly influences
accounting practices in the United States.
Term
book value.
 Definition
An asset’s original cost, adjusted for transaction costs, depreciation,
and other amounts.
Term
capital gain.
 Definition
The amount by which the selling price of an asset exceeds its
purchase price.
Term
capital loss.
 Definition
The amount by which the purchase price of an asset exceeds
the asset’s selling price.
Term
coupon rate.
 Definition
A bond’s stated interest rate.
Term
current market value.
 Definition
An asset’s selling price under current economic conditions.
Also known as fair market value.
Term
debt investments.
 Definition
Financial assets representing a claim to collect a loan from a
borrower.
Term
discount.
 Definition
When a bond’s current market value is less than the bond’s principal,
the difference between the bond’s current market value and the bond’s par.
Term
effective rate of return.
 Definition
The actual rate of return. Also known as effective yield.
Term
equity investments.
 Definition
Ownership of an asset or assets or of shares in a corporation.
Term
escrow account.
 Definition
A trust account used to pay property maintenance expenses,
property taxes, insurance, and other expenses related to a mortgaged property.
Term
Financial Accounting Standards Board (FASB).
 Definition
A private organization that
represents the accounting profession and to which the SEC has delegated
responsibility for establishing U.S. GAAP.
Term
GAAP accounting records.
 Definition
Accounting records that are designed to support
financial reporting to investors and the public and that focus on showing the
company’s financial stability along with its profitability.
Term
gross investment income.
 Definition
The amount of income that represents the total amount
of income an insurer actually earned during the reporting year, before deducting
investment expenses.
Term
historical cost.
 Definition
The purchase price originally paid for an asset.
Term
impaired securities.
 Definition
Securities that are in default. Generally, a security is in
default or impaired if the security’s issuer is not current on payments of principal
or interest or if the security’s issuer is in receivership or bankruptcy.
Term
intangible assets.
 Definition
Assets that represent ownership of a legal right or another
nonphysical resource.
Term
internal accounting records.
 Definition
Accounting records designed to support financial
reporting to company management, whose main interest is in having appropriate
data for making decisions. Also known as modified GAAP accounting records or
management accounting records.
Term
Internal Revenue Service (IRS).
 Definition
A part of the U.S. Department of the Treasury
that enforces laws and regulations concerning federal income taxes.
Term
investment expenses.
 Definition
The costs associated with managing invested assets.
Term
investment income.
 Definition
Income consisting of the earnings a company receives
on its invested assets.
Term
long-term assets.
 Definition
Assets that a company expects to hold for more than one year.
Also known as noncurrent assets.
Term
lower of cost or market (LCM) rule.
 Definition
A statutory accounting rule that defines
a bond’s monetary value as either its amortized cost or its current market value,
whichever is lower.
Term
National Association of Insurance Commissioners (NAIC).
 Definition
An association of
state insurance commissioners designed to promote consistent insurance regulation.
Term
net investment income.
 Definition
The amount of investment income that remains after
deducting expenses and amortization from an insurer’s gross investment income.
Term
non-admitted assets.
 Definition
Assets for which no value may be reported on the
Assets page of a life insurance company’s U.S. Annual Statement.
Term
other than temporary impairment (OTTI) standards.
 Definition
SEC reporting standards
that require bonds to be reported at a reduced value if their price remains below a
specified threshold for longer than three months.
Term
par.
 Definition
The amount of money—usually $1,000—that must be repaid at a bond’s maturity.
Term
premium.
 Definition
When a bond’s current market value is greater than the bond’s par,
the difference between the bond’s current market value and its par.
Term
real estate.
 Definition
Land or anything attached to the land.
Term
realized gain (loss).
 Definition
The difference between an asset’s net sales proceeds
and its book value.
Term
Securities and Exchange Commission (SEC).
 Definition
A federal government agency
that regulates the investment industry.
Term
short-term assets.
 Definition
Cash and assets that a company expects to convert
to cash within one year. Also known as current assets or liquid assets.
Term
statutory accounting records.
 Definition
Accounting records designed to support financial
reporting to state insurance regulators, whose primary interest is in evaluating
insurers’ solvency and long-term financial stability.
Term
tangible assets.
 Definition
Assets that have physical form.
Term
tax accounting records.
 Definition
Accounting records designed to support financial
reporting to taxing authorities.
Term
valuation
 Definition
The process of calculating the monetary value of assets, liabilities,
and owners’ equity.
Term
write-down.
 Definition
A permanent reduction in the book value of an asset.
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