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accounting for receipt of insurance claim

Krishna Khaitan's Profile

Hi We had a fire in our plant which resulted in insurance claim for Property damage and Business interruption. For simplicity, Let me put some numbers; Damage to property, corrected by spending on repairs - $500K Business Interruption claim - $400K Total insurance claim $900K Insurance claim received $150K (deductible $750K) We have accounted for repairs of $500K as a part of repair cost. How do I account for receipt of insurance claim of $150K. Krishna

Answers

Topic Expert
Keith Perry
Title: Consulting CFO and Business Operations A..
Company: Growth Accelerator
(Consulting CFO and Business Operations Advisor, Growth Accelerator) |

Krishna,

Basically you send it all to Other Income / Expense, as it is non-operating. Lumping it all together helps to clarify the impact.

E&Y has a nice publication here:
http://www.ey.com/Publication/vwLUAssets/TechnicalLine_BB2425_HurricaneSandy_2November2012/$FILE/TechnicalLine_BB2425_HurricaneSandy_2November2012.pdf

So, for the claim it is
DR Cash
CR Other I/E

Cheers,

KP

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