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The classification of insurance proceeds in the income statement depends on the nature of the insurance claim. ASC 410-30-45-4 requires credits arising from recoveries of environmental losses to be classified in the same line items as the related loss. ASC 220-30-45-1 indicates that reporting entities have a choice in how to classify business interruption insurance recoveries as long as the classification is not contrary to other US GAAP. However, classification guidance is not provided for many other types of claims (including involuntary conversions). Judgment should be applied to determine what presentation is most meaningful. Once a recovery meets the requisite recognition threshold (see FSP 23.5), it should be recognized in the income statement. The proceeds should not be recorded as a reduction of the cost to rebuild or replace the insured asset.
New guidance
Upon adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), ASC 605-40 will be superseded.
The presentation and disclosure requirements of ASU 2014-09 are discussed in FSP 33.
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