Cassidy Donelan
Professor Henry
BACC 3110
15 October 2015
Case #1 – Aetna, Inc.’s Critical Accounting Policies
Critical accounting policies for firms or industries are policies having a high level of subjectivity, bearing a material impact on financial statements. These estimates, required by the Securities and Exchange Commission (SEC) are outlined in the Management’s Discussion and Analysis (MD&A) section of each company’s 10-K filing as of 2002. The SEC, in requiring these estimates to be disclosed, hoped to increase investor understanding of why critical accounting estimates were important, and how each policy’s figures were arrived at.
Aetna Inc., a Connecticut-based company within the managed healthcare industry, sells health insurance plans and services covering “medical, pharmacy and dental plans, life and disability plans, Medicaid services, behavioral health programs, and medical management” (“Creating a Healthier World”). The nature of the healthcare industry makes it necessary for companies, such as Aetna, to rely on critical accounting estimates in their annual preparation of their financial statements. …show more content…
Filing Data”). Because much of Aetna’s business cannot be predicted, such as when an individual is going to rely on their policy to cover unforeseen medical bills, estimates must be used for this calculation. As such, it is important to inform investors of the reasoning behind how each number was
Professor Henry
BACC 3110
15 October 2015
Case #1 – Aetna, Inc.’s Critical Accounting Policies
Critical accounting policies for firms or industries are policies having a high level of subjectivity, bearing a material impact on financial statements. These estimates, required by the Securities and Exchange Commission (SEC) are outlined in the Management’s Discussion and Analysis (MD&A) section of each company’s 10-K filing as of 2002. The SEC, in requiring these estimates to be disclosed, hoped to increase investor understanding of why critical accounting estimates were important, and how each policy’s figures were arrived at.
Aetna Inc., a Connecticut-based company within the managed healthcare industry, sells health insurance plans and services covering “medical, pharmacy and dental plans, life and disability plans, Medicaid services, behavioral health programs, and medical management” (“Creating a Healthier World”). The nature of the healthcare industry makes it necessary for companies, such as Aetna, to rely on critical accounting estimates in their annual preparation of their financial statements. …show more content…
Filing Data”). Because much of Aetna’s business cannot be predicted, such as when an individual is going to rely on their policy to cover unforeseen medical bills, estimates must be used for this calculation. As such, it is important to inform investors of the reasoning behind how each number was