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1. Consolidated
Statements after
acquisition of
two different
subsidiaries
Lumber and Insurance Companies

2. Insurance Companies
• Broken down into 2 major segments:
• Property/Casualty - also known as
general insurance or nonlife
• Life/Health
• Property/Casualty insurance covers
homes, autos and businesses
• Life/Health covers life, long term care
and disability, annuities and health
insurance policies

3. Accounting Practices
• There are significant differences in reporting procedures for both segments
• Contract duration - long vs. short term contracts
• Property/casualty policies are usually short term contracts because they are only for 6
months to a year
• Disability, long term care and annuity contracts are long term contracts
• Variability of Claims Outcomes Per Year - For property/casualty insurance claims factors
vary depending on whether they were made under the policy and how much each claim
settles for. Life insurance and annuity contracts are fixed amounts

4. Financial Reporting
for Insurance
Companies
• Financial statements include a
balance sheet, an income statement
and a section known as the Capital
and Surplus Account
• Regulators require insurers to have
enough surplus to support the
policies they issue

5. Lumber Companies
• Under IFRS biological assets are recorded in the balance sheet at their fair value.
• FASB No. 40 is used in addition to FASB No. 33 for the measurement of timberlands,
growing timber and related expenses on a current cost basis.
• Current cost basis - combines measures of assets and expenses at either historical
cost/constant dollar amounts or current cost amounts along with current cost measures of
other assets and expenses.
• An enterprise only needs to use currentt cost basis if it has significant amounts of
inventory, property, plant and equipment apart from timberlands and growing timber

6. Consolidation of
Financial Statements
• FASB 810 requires an evaluation of what
parties if any, bear the overall risk and
rewards of ownership and whether any
one organization is the primary
beneficiary of the "captive"
• Risk of loss must be substantially
transferred to the captive for normal
insurance company accounting to be
applied
• If not premiums and losses are
accounted for under deposit accounting
and would be included in parent
company's financial statements

7. Can's & Can't Dos
Consolidation cannot occur if:
• Subsidiary is in legal
reorganization
• Bankcruptcy
• Operates under foreign
exchange restrictions, controls
or other governmental
uncertainties
Consolidation can occur if:
• More than 50% of the company
is owned
• Equity method should be applied
and assets should be valued at
Fair Value

8. FASB Statement No. 52
• Uses functional currency translation approach to determine the folllowing:
• Identifying functional currency
• Measuring all statements in the functional currency
• Using current exchange rate to change functional to reporting currency, if they differ
• Impact of changes in exchange rate on net investment vs. Individual assets and liabilities
• Applies both individually and collectively when determining functional currency

9. Currencies
• New Zealand uses the New Zealand
dollar
• Exchange rate is 1.62 US dollars to 1
NZD
• Spain uses the Euro
• Euro Exchange rate is 1 Euro = 1.13 USD

10. Presentation of Different Currencies
• The IFRS allows any entity to present its financial statements in any currency
• If the presentation currency differs from the entity’s functional currency, it translates its
results and financial position into the presentation currency.
• Since our company and the possible acquisitions would have different currencies financial
statements shall be expressed in a common currency so that they may be presented

11. References
• IAS 21: The Effects of Changes in Foreign Exchange Rates -
Retrieved from URL:http://www.ifrs.org/Documents/IAS21.pdf
• Summary Of Statement No. 52 - Retrieved from
URL:http://www.fasb.org/summary/stsum52.shtml
• February 2015, FASB Accounting Standards Update, Retrieved from
URL: https://asc.fasb.org/imageRoot/92/63493892.pdf
• Metzloff,Pete, February 21, 2017, GAAP and Statutory Reporting
Issues Faced by Captive Insurance Companies
• Retrieved from URL: http://www.skodaminotti.com/blog/gaap-and-
statutory-reporting-issues-faced-by-captive-insurance-companies/