Celebrate Freedom and save 20% OFF on CAclubindia Pro Subscription! Use code: FREEDOM20

Accounting treatment for stolen asset

Sunil Nayak (Chartered Accountants) (96 Points)

17 August 2007

An asset has been stolen during FY 2006-07. Claim is lodged with the Insurance company, but not received till 31-03-2007. Insurance claim receivable in next year (after 31.03.2007) is Rs.6 lakhs. The WDV of stolen asset as on 01.04.2006 is Rs.6.30 lakhs. Rate of depreciation is 25%.

How to account for this as on 31.03.2007? What is the amount of profit / loss to be shown in the books? Any suggestion ?

Reply
Follow
Share

3 Replies

Taroon Sharda (Job) (125 Points)
Replied 17 August 2007

In my opinion make the provision as on 31.03.2007 and finally settle it when claim is received. If any other option is avaiable pls share it.
Thanks

Upgrade to CAclubindia Pro. Subscribe Now!

Shyam Lal Naik (Service) (6156 Points)
Replied 18 August 2007

In my opinion if the amount receivable from the insurer is certain and is known before the date of approval of accounts, the same can be considered to find profit or loss. The profit/Loss will be difference between WDV on the date asset was stolen and amount receivable from insurer. This tretment will be in line with AS 4.

Gaurav Gupta (Chartered Accountants) (87 Points)
Replied 18 August 2007

In my opinion,take depreciation upto the date of loss of asset i.e.either half or full year's depreciation @ 25%. As the Insurance Claim is finalised already at Rs.6 Lacs.It should be taken to Balance Sheet as Receivable as on 31.03.2007.When the WDV will be calculated it will result into profit as Insurance claim of Rs.6.00 Lacs shall exceed the WDV of the asset as on 31.03.2007.i.e 6.30 lacs less depreciation @ 25%.Since the Accounting Prudence does not recognise Profit before it accrues.Thus the profit will be reckoned as and when the claim is received.