![]() Additionally, companies may have to temporarily utilize third-party organizations or different employees to perform certain functions, such as invoicing or cash collection. This may also create a greater risk of cyber attacks because IT personnel that may be monitoring such threats may be diverted to rebuilding systems following the natural disaster. Such a relocation may require separating functional groups within the company, such as separating finance and accounting from computer processing and information technology. Business interruption insurance recoveries, even if based in part on lost revenue, should not be presented as revenue from contracts with customers as they would not meet the definition of revenue within ASC 606.Ĭompanies whose operations have been impacted by natural disasters may have to relocate their facilities or may have key personnel unavailable on a temporary basis. In particular, if the insurance recoveries relate to property damage, the proceeds should not be recorded as a reduction of the cost to rebuild or replace the insured asset. ![]() ![]() Once a recovery meets the requisite recognition threshold, it should be recognized in the income statement. Judgment should be applied to determine what presentation is most meaningful. However, income statement classification guidance is not provided for many other types of insurance claims. ASC 220-30-45-1 indicates that companies have a choice in how to classify business interruption insurance recoveries as long as the classification is not contrary to other GAAP. The accounting guidance related to environmental claims recoveries (ASC 410-30-45-4) requires recoveries to be classified in the same line items as the related loss. The classification of insurance proceeds in the income statement depends on the nature of the insurance claim. Additionally, companies are required to disclose the amount of gains and losses reclassified from AOCI into earnings as a result of the discontinuance of hedge accounting. In such rare circumstances, ASC 815-30-40-4 permits the net derivative gain or loss related to the discontinued cash flow hedge to remain in AOCI until the forecasted transaction impacts earnings. In rare circumstances, the existence of extenuating circumstances that are related to the nature of the forecasted transaction and are outside the control or influence of the company may cause the forecasted transaction to be probable of occurring on a date that is beyond the additional two-month period of time. If a company determines that the hedged forecasted transaction is probable of not occurring by the end of the originally specified time period (or within an additional two month window thereafter), amounts deferred in AOCI are required to be recognized in earnings immediately. Any derivative gains or losses deferred in AOCI prior to the change in likelihood will remain in AOCI until the forecasted transaction impacts earnings (or until the forecasted transaction becomes probable of not occurring). If at any time the likelihood of the hedged forecasted transaction ceases to be probable of occurring, hedge accounting will cease prospectively and all future changes in the fair value of the derivative will be recognized directly in earnings. The deferred derivative gains or losses should continue to be reported in accumulated other comprehensive income. If the forecasted transaction is probable of occurring by the end of the originally-specified time period or within an additional two-month period, hedge accounting should still be permissible. Transfers and servicing of financial assetsĬompanies that have designated forecasted transactions in cash flow hedging relationships, such as raw materials purchases, sales or revenues, debt issuances, or interest payments, may experience a delay in the occurrence of the actual transaction as compared to the forecasted date. 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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