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I have a client that experienced a loss due to a natural disaster. There is an insurance policy in place that covers losses to inventory (insured at net sales value), the building, and the policy also allows for losses due to business interruption. There is one deductible covering all types of assets. I am seeking assistance in answering two questions:
1) It is expected that there will be a gain recognized on recovery under the insurance policy. When determining the gain must it be recognized on all assets covered together or can it be done by asset type (.i.e. inventory, separate from the building, and also the business interruption)? The policy is specific with respect to the different coverage that will apply to inventory loss as opposed to the building and also business interruption coverage.
2) In terms of the deductible on the policy, should it be allocated between each of the different types of coverage (business interruption, inventory, building) when determining the gain/loss?
Thank you in advance for your assistance.
1) It is expected that there will be a gain recognized on recovery under the insurance policy. When determining the gain must it be recognized on all assets covered together or can it be done by asset type (.i.e. inventory, separate from the building, and also the business interruption)? The policy is specific with respect to the different coverage that will apply to inventory loss as opposed to the building and also business interruption coverage.
2) In terms of the deductible on the policy, should it be allocated between each of the different types of coverage (business interruption, inventory, building) when determining the gain/loss?
Thank you in advance for your assistance.