ASC

ASC 220-30

Business Interruption Insurance

220 Income Statement—Reporting Comprehensive Income

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In brief

IntroductoryPresentationDisclosureFinancial statement presentationContingencies and guarantees

ASC 220-30 governs how an entity presents and discloses recoveries under business interruption insurance — insurance covering lost gross margin, a portion of fixed charges and expenses related to that lost margin, and extra expenses incurred to mitigate the interruption loss. The core rule is permissive on presentation: an entity may choose any classification of the recoveries in the statement of operations so long as it is not contrary to existing GAAP (220-30-45-1). In exchange for that flexibility, the Subtopic mandates note disclosure of the event and the amount and location of recoveries recognized.

Key points (6)
  • The Subtopic provides only presentation and disclosure guidance for business interruption insurance; it does not establish recognition or measurement rules (220-30-05-1).
  • Covered costs and losses typically include lost or unearned gross margin, a portion of fixed charges and expenses related to that lost gross margin, and other expenses incurred to reduce the interruption loss such as temporary facilities, equipment rent, and subcontractors (220-30-05-2).
  • Scope follows the Overall Subtopic, Section 220-10-15 (220-30-15-1).
  • An entity may choose how to classify business interruption insurance recoveries in the statement of operations, provided the classification is not contrary to existing GAAP (220-30-45-1).
  • In each period recoveries are recognized, the notes must disclose the nature of the event causing the business interruption losses (220-30-50-1(a)).
  • The notes must also disclose the aggregate amount of recoveries recognized during the period and the statement of operations line item(s) in which they are classified (220-30-50-1(b)).

For students. Exam traps center on the fact that this Subtopic gives a free choice of income statement line (it does not force extraordinary or "other income" treatment), but that freedom is conditioned on not violating other GAAP and on making the required disclosures. Students also wrongly assume ASC 220-30 tells you when to recognize a recovery — recognition of the insurance receivable/gain comes from other guidance (e.g., gain contingency rules), not here.

business interruption insuranceinsurance recoverieslost gross marginfixed charges and expensesincome statement classificationnote disclosureextra expenses to mitigate loss

Machine-generated study aid for ASC 220-30. Check the source paragraphs below.

220-30-00Status

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220-30-00-1
The following table identifies the changes made to this Subtopic.
Paragraph Action Accounting Standards Update Date
Business Interruption Insurance Added Maintenance Update 2017-19 (PDF) 11/15/2017
Gross Margin Added Maintenance Update 2017-19 (PDF) 11/15/2017
220-30-05-1 Added Maintenance Update 2017-19 (PDF) 11/15/2017
220-30-05-2 Added Maintenance Update 2017-19 (PDF) 11/15/2017
220-30-15-1 Added Maintenance Update 2017-19 (PDF) 11/15/2017
220-30-45-1 Added Maintenance Update 2017-19 (PDF) 11/15/2017
220-30-50-1 Added Maintenance Update 2017-19 (PDF) 11/15/2017

220-30-05Overview and Background

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220-30-05-1
This Subtopic provides presentation and disclosure guidance for business interruption insurance.
220-30-05-2
The types of costs and losses covered by business interruption insurance typically include the following:
  1. a
    Gross margin that was lost or not earned due to the suspension of normal operations
  2. b
    A portion of fixed charges and expenses in relation to that lost gross margin
  3. c
    Other expenses incurred to reduce the loss from business interruption (for example, rent of temporary facilities and equipment, use of subcontractors, and so forth).

220-30-15Scope and Scope Exceptions

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Overall Guidance

220-30-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 220-10-15.

220-30-45Other Presentation Matters

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220-30-45-1
An entity may choose how to classify business interruption insurance recoveries in the statement of operations, as long as that classification is not contrary to existing generally accepted accounting principles (GAAP).

220-30-50Disclosure

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220-30-50-1
The following information shall be disclosed in the notes to financial statements in the period(s) in which business interruption insurance recoveries are recognized:
  1. a
    The nature of the event resulting in business interruption losses
  2. b
    The aggregate amount of business interruption insurance recoveries recognized during the period and the line item(s) in the statement of operations in which those recoveries are classified.

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