Purpose and main concept for the 3 accounting systems
Hello,
I noticed either near the top of the page or the bottom that there was a comment along the lines of the purpose & main concept for the 3 accounting systems (SAP, GAAP, CGAAP) being something important for this exam and I wanted to run my version of it by the team since I wasnt able to see it explicitly on the Wiki or in the BattleCards
SAP:
Purpose: Measures the ability to pay claims
Main concept: A focused report for regulators. The main features are assets are recognized when incurred, that loss reserves are net of reinsurance (aka doesnt include them), and it doesnt defer income taxes.
GAAP:
Purpose: Measurement of earnings
Main concept: A more generalized report for the greater public. It can defer the recognition of assets for asset/revenue matching. Loss reserves include reinsurance, and it does defer income taxes.
CGAAP:
Purpose: Consistency among financial statements across Canada
Main concept:
I'm less sure what to put for CGAAP, what are we loosing for in purpose vs main concept etc.
Thanks!
Comments
Yes, that's all correct! As for CGAAP, you can consider the main purpose as adhering to GAAP principles but incorporating specific Canadian regulatory requirements. It provided a standardized financial reporting framework, similar to what IFRS does now. Note that IFRS replaced CGAAP in Canada on Jan 1, 2011.