The insurance proceeds are received on April 1, 20X5.
#Balance sheet prepaid insurance verification
The insurer has communicated to PPE Corp that the amount of final settlement is only subject to verification of the identity of the warehouse damaged and the receipt of additional market data regarding its value. There is a $2 million deductible under the insurance policy. Based on its discussions with the insurer and review of the policy by in-house experts, PPE Corp concludes that it has a covered loss under the policy and that it is probable the insurer will settle the claim for the replacement cost of $105 million. PPE Corp files a property and casualty claim with its insurer for recovery of $105 million, as the insurance policy is for replacement cost. The warehouse had a net book value of $100 million and an estimated replacement value of $105 million as of the date of loss. Due to the nature of the damage, PPE Corp determines that there is a total loss. On November 1, 20X4, PPE Corp’s warehouse is heavily damaged by a tornado.
Subsequent event considerations under ASC 855, Subsequent Events ( FSP 28).Going concern considerations under ASC 205-40, Presentation of Financial Statements, Going Concern ( FSP 24.5).Derivative and hedging considerations under ASC 815, Derivatives and Hedging (PwC’s Derivatives and Hedging guide).Debt and liquidity issues, including debt covenant compliance under ASC 470, Debt (PwC’s Financing Transactions guide).Exit and disposal cost obligations, including contract termination costs under ASC 420, Exit or Disposal Cost Obligations ( PPE 6.4).Asset retirement obligations under ASC 410-20, Asset Retirement and Environmental Obligations, Asset Retirement Obligations ( PPE 3).Environmental obligations under ASC 410-30, Asset Retirement and Environmental Obligations, Environmental Obligations ( PPE 9).Indefinite-lived intangibles and goodwill impairment under ASC 350, Intangibles – Goodwill and Other ( BCG 8 and BCG 9).Long-lived asset impairment under ASC 360, Property, Plant, and Equipment ( PPE 5).Examples of additional accounting and reporting guidance to consider in these scenarios may include: While this chapter discusses the accounting for purchased insurance arrangements in the event of a loss, there may be additional accounting and reporting implications companies should consider when a loss event (e.g., natural disaster) occurs. Transfers and servicing of financial assets Revenue from contracts with customers (ASC 606) Loans and investments (post ASU 2016-13 and ASC 326) Investments in debt and equity securities (pre ASU 2016-13) Insurance contracts for insurance entities (pre ASU 2018-12) Insurance contracts for insurance entities (post ASU 2018-12) IFRS and US GAAP: Similarities and differences Business combinations and noncontrolling interestsĮquity method investments and joint ventures
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