Accounting For Fire Loss

Accounting treatment in following situation: Year-ending is 31-Dec-20xx. Fire occurred in factory on 11-Dec-2013. Audit report for 31-Dec-2013 has been issued with ‘disclaimer opinion’ as loss due to fire has not ascertained till reporting date. Insurance claim passed in month of May-2014 & received the money as well. Following losses are covered in insurance claim: - Damage to Assets - Loss of factory Rent - Professional/Advocate fees - Loss of inventory - Loss of profit (business interruption) What is the treatment for following: - How to Record a loss due to fire & In which year loss need to be recorded? - How insurance claim money received to be recorded? - How to present ‘loss of profit’? - Previous year FS need to be restated? - Refurbishment expenses for Assets

Answers

George Lyons MR • January 5, 2015

1) 2013 with estimates Fire & Cost to be reported from date of fire (Conservatism ~ Worse case scenario) & a reserved amount set up for estimated amount above insurance recovery.
2) Since all the cost seem to be recovered... the net impact is impact on cash flow timing, loss of capacity/ inventory and related impact on supply chain and customer goodwill. The final settlement will take place in 2014

The event should be classified as extraordinary event, and fully disclosed in related notes like a profit center (Best estimates of cost (Tangible & their related insurance coverage) Also quantify & Qualify the soft /intangible cost

3) Loss of profit only disclosed in MD&A and other notes

Note 2013 audit disclaimer is a cop out.... Change auditors Requirements are to fully and truly disclose the Expected cost because of this extraordinary event

Want to join the conversation? Submit an answer or ask a question by emailing us at [email protected]

Submit an answer

Accounting For Fire Loss

Answers

Reach our audience

Related Publications