Insurance Claim received post Balance Sheet

Insurance Claim received post Balance Sheet

Didn't find your answer?

A company received an Insurance Claim three months after the Balance Sheet date. The claim was agreed by the insurers within 1-2 months after the year end.

The insurance payout was to cover damage to repair leasehold property and some equipment plus business interruption. All repair & replacement costs are included  in the accounts year and I am happy with how to split the proceeds against the repairs and fixed assets that were replaced plus the payout for business interruption as other income.

My questions are:

1. should the insurance payout to cover the damage that was paid for by the year end be included in debtors as recoverable at the balance sheet date?

2. should the insurance payout relating to the business interruption be included in debtors as recoverable at the balance sheet date as well?

Thank you to anyone who can help me with this on a Saturday morning!

Replies (3)

Please login or register to join the discussion.

Euan's picture
By Euan MacLennan
03rd Mar 2012 19:34

Yes & Yes

Assuming that the insurance claim was made before the accounting date, it would be correct to include the potential proceeds as debtors at the accounting date.  If the claim had not been resolved by the time the accounts were signed off, you would have to make a reasonable estimate of the expected proceeds, but if the proceeds have been agreed by that time, you would include the actual figure.

Even if the claim had not been made by the accounting date, but the damage was covered by an insurance policy held by the company, you would include the (estimated) proceeds as a debtor provided that you knew that the claim was made after the accounting date or at least, that the company intended to make the claim, i.e: unless you had reason to believe that the company would not claim, perhaps to protect a no-claim bonus.

Thanks (0)
avatar
By Fmaat
04th Mar 2012 16:21

Yes or make a provision

"The claim was agreed by the insurers within 1-2 months after the year end". "Yes" to both your questions.

If the claim was either not agreed and/or quantified ascertained, but your client believed there was a case that the claim would proceed you would consider a provision under FRS12 "Provision for contingent liabilities and contingent assets" (IAS37)

Regards

Thanks (0)
avatar
By kevinread
05th Mar 2012 08:33

Thank you

Thanks to both of you for your answers.

Thanks (0)