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One of the major components in Malaysian Financial Reporting Standard 101 is financial statements. The financial statements are a structured representation of the financial position and financial performance of an entity. The objective of financial statement is to provide information about the financial position, financial performance and cash flow of an entity that is useful to a wide range of users in making economical decisions. Financial statements also show the result of the management's quality of the resources delegated to it. To meet the objective, financial statements provide information about an entity's:
Income and expenses, including gains and losses;
Contributions by and distributions to owners in their capacity as owners; and
A complete set of financial statements comprises:
A statement of financial position as at the end of the period;
A statement of comprehensive income for the period;
A statement of changes in equity for the period;
A statement of cash flows for the period;
Notes, comprising a summary of significant accounting policies and other explanatory information; and
A statement of financial position as at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or make a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements.
An entity may use titles for the statements other than those used in this standard.
There are some general features that must be obeys by every financial reports according to MFRS 101.
Fair presentation and compliances with MFRSs
Financial statements shall present fairly the financial position, financial performance and cash flow of an entity. Fair presentation requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the MFRSs.
When preparing financial statements, management shall make an assessment of an entity's ability to continue as a going concern. An entity shall prepare financial statements on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. The entity shall disclose every uncertainties and facts that may cause the entity cannot prepare the financial statement with going concern.
Accrual basis of accounting
AnÂ entityÂ shallÂ prepareÂ itsÂ financialÂ statements,Â exceptÂ forÂ cashÂ flow information, using the accrual basis of accounting. When the accrual basis of accounting is used, an entity recognises items as assets, liabilities, equity, income and expenses when they satisfy the definitions and recognition criteria for those elements in the MFRSs.
Materiality and aggregation
An entity shall present separately each material class of similar items. An entity shall present separately items of a dissimilar nature or function unless they are immaterial.
An entity shall not offset assets and liabilities or income and expenses, unless required or permitted by MFRS.
Frequency of reporting
An entity shall present a complete set of financial statements at least annually. When an entity changes the end of its reporting period and presents financial statements for a period longer or shorter than one year, an entity shall disclose.
An entity shall disclose comparative information in respect of the previous period for all amounts reported in the current period's financial statements, except when MFRSs permitted or required not to do so. An entity shall include comparative information when it is relevant to an understanding of the current period's financial statements.
Consistency of presentation
An entity shall retain the presentation and classification of items in the financial statements from one period to the next unless it is apparent, following a significant change in the nature of the entity's operations or a review of its financial statements, that another presentation would be more appropriate having regard to the criteria for the selection and application of accounting policies in MFRS 108 or MFRS requires a change in presentation.
B)Explain the background of the company.
Background of Lonpac Insurance Bhd.
Lonpac Insurance Bhd is a wholly owned subsidiary of LPI Capital Bhd, which formerly known as London & Pacific Insurance Company Berhad, and was incorporated in Malaysia on 12 July 1994. It commenced underwriting of general insurance business after a restructuring plan on 1 May 1999. The paid-up capital of the company is RM 200,000,000 comprising of 200,000,000 ordinary shares of RM 1.00 each.
The company operates through 21 branches in Malaysia and a foreign branch in Singapore to serve the clients better.
In September 2005, the Malaysian Rating Corporation Berhad (MARC) has reaffirmed the general insurance strength rating of Lonpac at "AA", reconfirming its financial stability and reliability in the insurance industry.
In September 2011, the A.M. Best Co. has affirmed the financial strength rating of "A-" and issuer credit rating (ICR) of "A-" to Lonpac. The rating recognized Lonpac's ability to gain market share while maintaining a favorable underwriting performance, regardless of the competitive operating environment in its core markets, namely Malaysia and Singapore.
Background of Kurnia Insurance
Kurnia Insurans Berhad, was incorporated on 30th December 1978. Back then, it was known by another name, Industrial and Commercial Insurance. Kurnia Insurans Berhad, in its present shape and form came to be, only in 1991, when the present owners bought the company.
Kurnia Insurans has become one of the most successful general insurance companies in Malaysia. Kurnia Insurans' success is founded on fair business practices, which protect the legitimate interests of its policyholders and offers business opportunities to its service providers.
With total capitalization of RM600 million and total assets exceeding RM2 billion, Kurnia Insurans stands as a pillar of the industry, representing stability and strength.
With an annual turnover in excess of RM1 billion and an agency force of 5,500 across the country, Kurnia Insurans also boasts one of the most extensive agency networks in the industry, represented in practically every town.
With the liberalization of the Malaysian insurance market, Kurnia has undertaken several protective measures in expectation of rising unbridled competition. One predominant move is strategizing towards e-commerce and seizing a prominent position by being the forerunner in providing online insurance services. Kurnia firmly believes that e-commerce will bring Kurnia to a higher level of performance and quality of service to its customers, business partners and agents in line with its motto "Excellence in Service".