- This topic has 1 reply, 2 voices, and was last updated 5 months ago by
P2-D2.
P2-D2.-
Posts
-
LuxetVeritas
- Topics: 17
- Replies: 17
- ☆
In September 30 2005, the directors of Company x discovered a fraud. In total, $700000 receivables had been stolen by an employee. $450000 was related to the previous year, and the rest is related to the current year. The directors are hopeful that 50% of losses can be recovered from the company’s insurers.
My question is: what impact does this case have on the company’s statement of profit or loss and statement of financial position?
What I find a bit complicated is that the receivables can be recovered from the insurance, which I don’t have any idea about the correct accounting treatment.
P2-D2
- Topics: 4
- Replies: 6115
- ☆☆☆☆☆
Hi,
Given that there was an impact on the prior year then there will be a prior year adjustment through the opening retained earnings.
The amount due from the insurer would be recorded as income if we were virtually certain to receive it from them.
Thanks
P2-D2- You must be logged in to reply to this topic.