Accounting – FAQ December 2011 (Part 2)
How to account for insurance compensation to be received for damaged assets?
Key words: Accounting, Thailand, Flood, Insurance Compensation
Insurance compensation received for items of property, plant and equipment that were impaired, damaged, lost or given up shall be recognised in profit or loss when the compensation becomes receivable- generally when the insurance company has formally accepted the claim and agreed the amount of compensation.
If the claim is probable, but not virtually certain at balance sheet date, it should be disclosed in the notes to the financial statements.
Compensation from insurance should be accounted for separately from the impairment or the derecognition of the covered assets. As a result, assets will probably be impaired or written off at balance sheet date, while insurance claims may be recognised in subsequent accounting periods.