How do we account for an Insurance Claim?

How do we account for an Insurance Claim?

Insurance claim accounting can be a source of frustration for Associations (management companies) and their auditors. It is not that the accounting is complicated, it is getting all the information and piecing together the pieces to the puzzle.

Segregate income and repair expenses in separate accounts for each claim.

This is not required by GAAP, but preferred presentation is to separate income and expense as it gives transparency for the Board and auditor. Alternately, prepare a sub-schedule or worksheet of each claim. Without this segregation, there is the potential that the auditor may not be able to issue an audit opinion and/or material internal control comments will be included.

Obtain insurance claim documents for each claim

Reconcile each claim separately