Reviewed by Robert B. Yahr Marquette University
This book is a reprint of two earlier books describing the impact of two United Kingdom legislative acts—the 1870 Life Assurance Companies Act and the 1909 Assurance Companies’ Act—on life insurance company financial reporting. The first book was authored by T. B. Sprague, a president of the Institute of Actuaries; the second book, a revision of the first, was prepared by his son, A. E. Sprague. The primary purpose of each edition was to explain the function of the several financial statements required by each act and to describe the principles of accounting underlying those re-quired statements.
Although British accounting in 1870 was more advanced than it was in the United States, financial reporting in general was in its infancy at that time, with financial reports usually limited to summaries of cash transactions. The 1870 Act was designed to establish a set of uniform statements which would more accurately reflect the financial position of life insurance companies. The 1909 Act revised some of these statements by clarifying parts of the earlier act and by expanding the amount of information required.
In recognition of the intentions of these acts, the authors begin each edition by explaining the differences between a cash account (a statement summarizing cash transactions) and the required “revenue account” (a statement similar to the modern income statement). They also illustrate the effects of using a cash account on the analysis of financial relationships. After differences between cash and revenue accounts are explained, the remainder of each edition is devoted to explanations of the required financial statements and each item which should appear thereon.
The authors’ discussions in both editions continually emphasize the need for uniform financial reporting. One extension of this emphasis on uniformity forms in this reviewer’s mind the most in-teresting aspect of the first edition. As an outgrowth of analyzing each company’s 1871 annual report, T. B. Sprague intersperses citations of actual deficiencies in the various companies’ reports within his analysis of the Act’s requirements. For example, in his discussion of “Mortgages on Property within the United Kingdom” (pp. 66-74), he describes the items the 1870 Act requires under this heading and then indicates 103 instances where companies have failed to classify properly some of their holdings. This meticulous analysis typifies the care that he took in writing the entire first edition.
The first edition very accurately portrays the status of financial reporting immediately after passage of the 1870 Act. It also serves to provide a reader familiar with the history of life insurance reporting in the United States with a greater understanding of the background behind the adoption of certain accounting principles for American companies. The second edition, while not containing all the detail of the first, adequately explains the revisions to financial reporting mandated by the 1909 Act.
Both the first and second editions contained in this reprint book are recommended for individuals having an interest in either financial reporting for life insurance companies or the development of accounting in the United Kingdom.
