How to register Insurance refund invoice

[DaveC49]

Hi Alberto,

How you should treat an insurance claim payout  may depend strongly on the
legislation in your jurisdiction. In Australia, such payouts are generally
non-taxable (although there are some conditions where they can be taxable -
generally if the payment significantly exceeds any loss incurred) so one is
generally required to declare them as non-taxable income in a tax return and
it is assessed by our tax office. The insurance company does not send you an
"invoice", which would be a claim for payment  of them by you, but rather a
payment advice. The business features in Gnucash cover routine everyday
business practice, whereas an insurance claim/payment is a non routine event
unless you are in the insurance business.

For a business the situation can be more complex. Generally the payment
would be recognized as income  (which may or may not be taxable depending on
local laws), but thatincome would generally be offset by the loss which
resulted in the claim. The payout may not fully cover the loss, in which
case there will be a residual loss which may depending on your local
legislation be used to offset other income. the following site has some
suggestions for recording the loss and payouts but please note that this may
be highly dependent upon your local laws and you should perhaps seek
professional advice.

http://www.accounting-basics-for-students.com/-journal-entry-for-insurance-claim-.html.

What is a bit more contentious is when the payment should be recognised
(recorded) in the books of a business. An insurance claim once submitted
would generally be regarded as a contingent asset and these are not normally
recognised at the time of the claim, as their payment is dependent upon the
decision of an external body, the insurance company. They are generally
recognised when the insurance company accepts the claim and agrees to make
payment or actually makes the payment, i.e when the payment to you becomes
certain  ( see
http://www.ifrs.org/Meetings/Documents/IFRICSep11/101109AP10AIPIAS16recognitionofcompensationwhenreceivable.pdf
for a discussion of this) . 

This is the position under the IFRS (International Accounting Standards)
which again may or may not apply in your jurisdiction depending upon whether
they have been adopted under your local legislation. Even if the IFRS
standards were adopted locally, they may be modified to fit in with other
local circumstances/ legislation.

Cheers

David Cousens



--
View this message in context: http://gnucash.1415818.n4.nabble.com/How-to-register-Insurance-refund-invoice-tp4686800p4686818.html
Sent from the GnuCash - User mailing list archive at Nabble.com.