Beyond the Bottom Line

Yolanda Smith

ACC/422

October 8, 2012
Jonathan Rubin

Beyond the Bottom Line

When viewing the financial statement for Kansas City Life Insurance the second quarter report for the consolidated balance sheets. In order to take a deeper look at the notes to the financial statements related to cash and cash equivalents, receivables, and inventories a notation refers the viewer to the company’s form 10-Q and annual report on Form 10-K. The additional information or disclosures are listed in separate sections of the Form 10-Q. The balance sheet is listed in the beginning of the form and then a disclosure for each category is provided. The notes begin with an explanation of consolidated. This is primarily due to the heading for the balance sheet that displays “consolidated” balance sheet. The accounts of the consolidated entity (the Company), primarily consists of three life insurance companies: Kansas City Life Insurance Company (the parent company) and wholly-owned subsidiaries- Sunset Life Insurance Company of America (Sunset Life) and Old American Insurance Company(Old American) (Kansas City Life Insurance Form (10-Q). The balance sheet lists cash and cash equivalents under the assets section. The cash, cash equivalents and other resources that can convert into cash during the firm’s normal operating cycle are listed. Cash is listed as a separate category. There is the accrued investment income, deferred acquisition costs, reinsurance receivables, property and equipment, other assets, and separate account assets. The obvious disclosure mentioned is that General Accepted Accounting Principles was used for this reporting. We will start with the beginning assets. One requirement related to fair value disclosure is that both the cost and the fair value of all financial instruments be reported in the notes to the financial statements (Kieso, Weygandt and Warfield, 2010). The consolidated balance sheet begins with the investments. This publicly held company has fixed maturity securities and Equity securities available for sale, at fair value. The other detailed investments are mortgage loans, real estate, policy loans, short-term investments and other investments. The fixed maturity and equity services indication of sale at fair value makes these items as cash equivalents. According to Kieso, Weygandt, and Warfield (2010), “Cash equivalents are short-term highly liquid investments that will mature within three months or less.” This also lumps the mortgage loans, real estate policy loans, and short term investments into this category of cash equivalents. All of these items are short-term investments because they fall into the three separate portfolios for valuation and reporting purposes: Held-to-maturity, Trading, and Available-for-sale (Kieso, Weygandt, Warfield and 2010). For loan-backed and similar asset-backed securities, the determination of any amount of impairment that is due to credit is based upon the present value of projected future cash flows being less than the amortized cost of the security (Kansas City Life Insurance Form (10-Q). The disclosure also states that