Treatment : insurance claim received for asset destroyed de

Mr Nair

The purpose of insurance is to make the loss good and not to make profit out of it. Insurance proceeds received over and above the WDV of asset will not result in any type of profit to you. It should be strictly adjusted against the cost of buying a new asset.

9.1

The cost of an item of fixed asset comprises its purchase price, including import duties and other non-refundable taxes or levies and any directly attributable cost of bringing the asset to its working condition for its intended use; any trade discounts and rebates are deducted in arriving at the purchase price. Examples of directly attributable costs are:

site preparation;
initial delivery and handling costs;
installation cost, such as special foundations for plant; and
professional fees, for example fees of architects and engineers.

The cost of a fixed asset may undergo changes subsequent to its acquisition or construction on account of exchange fluctuations, price adjustments, changes in duties or similar factors.

Insurance claim should also be read in line with the discounts and other rebates as mentioned above. Go with the spirit of the accounting standard and not with the textual words.

Thanks