Intermediate Accounting GAAP Discussion

Essay by mufdivaUniversity, Bachelor'sA, March 2002

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The Statement of Financial Accounting Standard (SFAS) # 120 is a statement focusing on the accounting and reporting for mutual life insurance enterprises. The primary function of an insurance enterprise is to provide a means of economic protection for its customers from risks that may occur or are discovered in a specified period. The types of risks that may be incurred and covered by an insurance company are death, disability, damage to property, injury to others (in terms of liability), and interruptions to normal business activities. The primary focus of SFAS # 120 is to extend the guidelines described in statements 60, 97, and 113. Since prior to the issuance of statement 120 mutual life insurance enterprises were explicitly excluded from the guidelines described in those statements this statement also amends the Financial Accounting Standards Board (FASB) Interpretation No. 40, Applicability of Generally Accepted Accounting Principles to Mutual Life Insurance and Other Enterprises, referring it's date of effect to December, 15 1995.

The SFAS prior to 120 include Statements 60,97,and 113, which were applied primarily to insurance companies and outlined the Generally Accepted Accounting Principles (GAAP), which were to be implemented by enterprises of this sort. The first statement to be applied specifically to insurance enterprises is SFAS 60, which is Accounting and Reporting for Insurance Enterprises issued in 1982. This statement recognizes the specialized principles and practices from the AICPA insurance industry related Guides and Statements of Position and establishes financial accounting and reporting standards for insurance enterprises other than mutual life insurance enterprises

SFAS 97 issued in 1987 is entitled Accounting and Reporting by Insurance Enterprises for Certain Long-Durations Contracts and for Realized Gains and Losses from the sale of Investments. This statement establishes standards of accounting for certain long-duration contracts issued by insurance enterprises, referred to in...