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Insurance coverage for a Construction Project

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Insurance coverage for a Construction Project

  • This topic has 3 replies, 2 voices, and was last updated 10 years ago by MikeLittle.
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  • November 14, 2014 at 3:41 pm #210009
    annz2020
    Member
    • Topics: 17
    • Replies: 14
    • ☆

    Dear Sir,

    If a company say, paid $150,000 insurance premium for a Construction Project, say coverage period from 1 Jan 2014 to 31 Dec 2017 plus 18 months maintenance period by insurer.

    This company financial closing is year-end 31 Dec.
    How should i apportion the prepayment insurance portion over the coverage period on Construction Project?
    Should i include the maintenance period of 18 months for prepayment?

    Thanks

    November 16, 2014 at 9:04 am #210341
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    Try to separately analyse the insurance cover costs from the maintenance element.

    Spread the insurance cover costs over the four years of the construction and, on completion of the project, start to expense the maintenance element.

    In direct answer to your specific question, yes, treat the maintenance costs as a prepayment until the maintenance period begins

    Ok?

    November 16, 2014 at 12:41 pm #210428
    annz2020
    Member
    • Topics: 17
    • Replies: 14
    • ☆

    Thank you

    November 16, 2014 at 9:28 pm #210543
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    You’re welcome

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