Exam DISC-IA Practice Question 3
Study guide: Exam DISC-IA
An insurer discloses that its loss reserve is an actuarial estimate, explains the methods and the main sources of uncertainty, and applied those methods without error. Two years later the reserve proves to have been 8% too low. Which statement is consistent with FASB Concepts Statement No. 8?
- A) The reserve lacked faithful representation, because it was not accurate in all respects
- B) The reserve lacked relevance, because an estimate that turns out wrong cannot affect decisions
- C) The reserve could still be a faithful representation, since free from error does not mean exact
- D) The reserve lacked verifiability, because observers could not have agreed on its exact amount
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