Treatment of Insurance claims

Treatment of Insurance claims

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I have a client who has made insurance claims and has been paid out now substantially for the claim with some more to come on final agreement of the figures.

Obviously the Business Interruption element can go straight to P & L as "deemed" turnover.

However the computer equipment and office furniture element of the payout exceeds the replacement cost of the assets and B/F cost together.

I was going to offset the insurance claim element against the capital cost of the B/F and replacement cost with the balance of the claim going to P&L account with the business interruption element. You can assume a total loss of previously held office equipment and computer equipment (flooded).

However it therefore leaves my client with no tangible fixed assets on the balance sheet - which doesn't seem logical when there are brand new assets sat there.

Would it be therefore correct to leave the replacement items on the balance sheet with a larger credit going straight to the P&L ?

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By GW
16th Oct 2014 11:44

Disposal proceeds

The amount received for the computers and furniture should be treated as sale proceeds with a gain on disposal going to the P&L account then the replacement items are treated as additions

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