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Hi Tutor,
There are 2 procedures I found in the BPP study text relating to rights and obligations and valuation of non current assets which I do not understand.
1. Review insurance policies to see whom the cover is in favor of. (Rights and obligations)
How does this affect the entity’s rights to the asset?
2. Review insurance policies in force for all categories of tangible non current assets and consider the adequacy of their insured values and check expiry dates. (Valuations)
How do the insured values provided by the insurance company affect the valuation of assets in the Statement of financial position?
Hope you could help me on this, thank you 🙂
1 To insure something you have to have an insurable interest, such as ownership. You cannot insure other people’s assets.
2 if something is in the FS at $500,000 but insured for only $200,000 you have to ask why there is such a discrepancy.
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