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Sir i was doing a question with my tutor , and in that question there was an case where the company did not record a legal claim primarily because it would be paid by the insurance company hence they did not include or disclose anything in financial statement , so my tutor said this Set Off goes against IAS 1 and should have been included in financial statement and disclosures, can u explain me this situation sir that why its against IAS 1 with example,
thanks alot
Here’s an extract from a summary of IAS1
“Materiality and aggregation
Each material class of similar items must be presented separately in the financial statements. Dissimilar items may be aggregated only if the are individually immaterial.
However, information should not be obscured by aggregating or by providing immaterial information, materiality considerations apply to the all parts of the financial statements, and even when a standard requires a specific disclosure, materiality considerations do apply.”
Does that do it for you?
thanks for that sir but what then shoud be the correct treatment under IAS 1 of the non disclosure of inclusion in financial statements of the legal claim being covered by the insurance claim?
If the insurance pay-out is virtually certain, the amount should be recognised as a receivable
If it’s not virtually certain – so better that 50% but not up to 95% – then it should be disclosed as a white on white appeal to the next level court
If it’s not even probable, then it can only be possible and, in that case, the treatment is a disclosure note in the Notes to the Financial Statements
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