Under GAAP, an insurer may change its accounting principles under which condition?

Prepare for the CAS Exam 6 with detailed study materials. Use flashcards and multiple-choice questions, each with hints and explanations, to get exam-ready!

Multiple Choice

Under GAAP, an insurer may change its accounting principles under which condition?

Under GAAP, changing an accounting principle is allowed only if the new principle is preferable to the one currently used. This means the insurer must show the new method provides more reliable and relevant financial information than the old method, improving the usefulness of the statements for users. It isn’t about changing whenever convenient, nor about achieving a more conservative result, nor about needing regulatory approval as the only condition. When a change is made, it is typically applied retrospectively to prior periods presented (with disclosures), so readers can compare across periods.

Under GAAP, changing an accounting principle is allowed only if the new principle is preferable to the one currently used. This means the insurer must show the new method provides more reliable and relevant financial information than the old method, improving the usefulness of the statements for users. It isn’t about changing whenever convenient, nor about achieving a more conservative result, nor about needing regulatory approval as the only condition. When a change is made, it is typically applied retrospectively to prior periods presented (with disclosures), so readers can compare across periods.

More practice questions