PRESENTATION OF INSURANCE CLAIMS AND RELATED INSURANCE RECOVERIES

By Steve Jones, CPA - Senior Manager

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASC) No. 2010-24 in August 2010, covering Health Care Entities (Topic 954) concerning how to account for and report insurance claims and related recoveries. ASC 2010-24 is effective for fiscal years beginning after December 15, 2010.

Currently, inconsistencies exist within the health care industry concerning the recording of malpractice and similar insurance claims and related insurance recoveries. Most health care entities record a liability for insurance claims net of the expected receivables for insurance recoveries. However, some health care entities record a liability for insurance claims and a receivable for any insurance recoveries. Other industries record both liabilities and receivables for claims and recoveries, respectively, as gross amounts without net reporting. This amendment eliminates an industry exception as to when net presentation is permissible. In addition, this amendment coincides with current International Financial Reporting Standards (IFRS), which does not permit the offsetting of assets and liabilities of insurance claims.

The ASU can be found by clicking here to access the FASB website. (Note: You will need to register for a free 'Basic' account to view the Standards Update).