Long-term contracts, such as life insurance, are very complex and have worked effectively for a long time. The Financial Accounting Standards Board (FASB), however, have proposed a draft that would significantly change long-term contracts in an attempt to improve their efficiency. Many argue for the draft to be passed due to its potential to optimize and improve the efficiency of long-term contracts. However, others also make a strong argument that if the long-term contracts work and currently serve their purpose, why change it? This may not seem like such a big deal because it is not like everyone is clamoring to discuss this draft or even cares enough to be informed about it. Truth be told, everyone should be more concerned about these …show more content…
These four areas are the key points of every long-term contract that it is written up. Long-term contracts now have the potential to improve in various ways thanks to these. Liability assumptions are the key points that the draft aims to improve the efficiency of. Changes would cause an analytical view when changing cash flow and using an urgent viewpoint when making more renovations (Towery). The updates in the draft would help in the long term cash flow of these contracts. Another main point of emphasis the draft focuses on are the discount rates of long-term contracts. Discount rates have always been a set earn rate and not based individually at all. This new draft has proposed to change these rates to be based individually which would improve their accuracy. “The Board believes that the proper rate for discounting the liability would be a market-based interest rate rather than one linked to an entity’s investment experience” (“FASB Proposes Targeted Improvements”). Basing these rates on the market and the individual contracts instead could vastly change the way rates of long-term contracts work. The last main points of the draft are the disclosures and the participating contracts. “Proposed amendments would require a disaggregated rollforward of future policy
9. How did the pension plan changes affect Harnischfeger’s financial statements in 1984? Are these changes likely to affect future profits?
The matters covered in a contract are the parties involved, any important dates (such as start and end dates), the definitions of terms used in the contract, the goods or services being provided, any payment amounts and dates for payment to be sent or received, potential interest on late payments, delivery or performance dates for services offered, insurance and guarantee promises, termination dates, renewal terms, damages for breach of contract and any extra special considerations.
Wally, business owner of Windy City Watches is located in downtown Chicago, IL. Business is booming and Wally needs to buy a large quantity of Rolek watches which sell for $50 apiece. He calls Randy Rolek, the wholesaler located in Milwaukee WI. They discuss terms on the phone for a while before coming to an agreement in which Wally offers to buy 100 watches for $25 each. Randy sends over an order form in which Wally states that he is agreeing to purchase watches from Randy for $25 each, but does not include the quantity in which he will buy. Randy sends 50 watches the following week with a note included stating that he has sent 50 watches and will send the other remaining 50 watches within a few days but includes the bill for the full
There are particulars to a contract which structure its existence. This includes the importance of terms within the contract, the freedom of contract, statements that do not become part of contract, and terms of contract.
Bernie a resident of Richmond, Virginia decides to sale his 2006 Ford Fusion for $13,000.00 and places an ad in his local newspaper on February 1st. After several weeks without any inquiries, Vivian contacts Bernie on March 1st stating she will pay him $12,000.00 for the car. Bernie arranges to meet with Vivian on March 5th to complete the deal. Vivian comes to Bernie’s house on March 10th and says she will give Bernie $12,500.00 for the car; but she needs three additional weeks to come up with the money. Bernie agrees but only if Vivian puts down a deposit. Vivian agrees and Bernie drafts an agreement stated the sale will must take place no later than March 31st. Vivian reads and signs the agreement and
If during the term of this EPC Contract there is any Change in Law (but excluding changes to Tax laws where such Taxes are based upon CONTRACTOR's inventory, income, profits/losses or cost of finance) which become effective after the Effective Date and which affect the cost or time of performance of this EPC Contract, CON'IRACTOR shall immediately notify CMA and submit detailed documentation of such effect in terms of both time and cost of performing the EPC Contract. If the Work is affected by such changes and CMA concurs with their effect, an equitable adjustment will be made pursuant to General Condition 32, titled CHANGES.
The change in the return on investment assumption is for all US plans. The economic consequence is that there will be less injection of cash by these pension owners during the lifetime of their pension. In 1984 the corporation established a new plan, which goal was an improvement in the minimum pension benefit. This constituted in a restructure of the Salaried Employees’ Retirement Plan.
For pensions and post-retirement accounting methods to recognize the benefit costs, estimates and assumptions on future events ascertaining the timing and amount of benefits payments must be sought first. This paper seeks to compare and contrast the early historical accounting for pensions and post-retirement healthcare and life insurance benefits with the rules and guidance applied today in addition to the changes to such guidance and rules that would improve the accounting and reporting of such benefits depending on the business and political changes and as such, predict the effect of such changes on financial reporting and accounting practices.
You work for a financial planning organisation that manages thousands of client’s portfolios and accounts. Recently there have been several changes in the industry that only affects clients who have share portfolios. For some clients, the changes will have a negative effect on their investments and for other clients, this will mean that they will be receiving good news.
9. How did the pension plan changes affect Harnischfeger’s financial statements in 1984? Are these changes likely to affect future profits?
Social contract denotes that a government or sovereign body exists only to serve the will of the people because the people are the source of political power that is enjoyed by the entity. The people can choose to give or withdraw the power. Not all philosophers agree that the social contract creates rights and obligations; on the contrary, some believe that the social contract imposes restrictions that restrict a person’s natural rights. Individuals who live within the society gain protection by the government from others who may pursue to cause them injury, in exchange, the citizens, must relinquish individual liberties like the capability to commit wrongdoings without being reprimanded, and they should contribute to making society
The four elements of a valid contract are offer and acceptance, meeting of the minds, consideration and competent parties. The contract must cover a legal purpose or objective as well (Binder, 2012). The objective theory of contracts holds that contract formation is dependent on what is communicated, rather than what is thought by one of the parties (Barnes, 2008).
There have been a number of proposed and upcoming changes to GAAP and solvency reporting standards in the US, Canada and Europe in recent years. In particular, significant efforts have been made to increase convergence between US GAAP and IFRS. The following report discusses the pros and cons of convergence between standards in different jurisdictions, as well as convergence between GAAP and solvency standards, in relation to insurance contracts. Here, the term ‘GAAP’ refers to financial reporting for investors, shareholders and creditors. Solvency standards refer to the regulatory requirements imposed on insurers. The jurisdictions discussed have been limited to those in which The Greatest Life Insurance Company operates in: namely, the US, Canada and Europe.
Contracts are used in many different forms and for just as many different situations within our everyday lives. Some contracts are more involved than others and for some; contracts are an essential of their success. As we continue, we will take a look at different types of contracts with the main focus on enforceable contracts. With so many elements that are incorporated into any contract, the six essential elements of enforceable contracts will be the main focus of this writing. Having a clearer understanding of the essentials of life will help prepare us for life’s curves that may come our way.
Using different types of sources an explanation to the basic principles of contract law and how they apply. From doing this there will then be an explanation to what extent standard forms of contract are special types of contract. Contract that has been chosen is the JCT 2005 standard from of contract with quantities.