ACCOUNTING FOR INSURANCE CLAIMS PAYMENTS IN FINANCIAL STATEMENTS

Abstract

Insurance in the life cycles of modern society is becoming increasingly important as a risk management tool. Insurance mechanisms guarantee stability, security and, to some extent, predictability for enterprises. Today, there are more and more challenges in accounting for insurance payments and insurance indemnities and their appropriate and proper reflection in financial reporting. Close business cooperation between the insurer and the insured is ensured by the transparency of insurance calculations, preparation and submission of financial reporting. Settlement of disputed accounting issues eliminates the possibility of errors in reporting. Accounting for insurance indemnities is important, but enterprises often make typical errors that can distort financial reporting. Understanding the tax consequences of insurance indemnities transactions is often a difficult task for the insured. The tax consequences of insurance transactions and their reimbursements generally depend on the nature, type, subtype of insurance and the specific circumstances associated with the loss (total, partial) or damage (total, partial, or liquidation itself. Payments for insurance reimbursements, compensation, deductibles that cover settlements or court decisions against the insured have their own (individual) set of tax rules and related requirements. The impartiality and transparency of financial reporting is of paramount importance. In general, this applies to the disclosure of information about insurance payments (reimbursements). Enterprises should provide true and correct data about these operations so that users of accounting information (counterparties, interested parties) have a full understanding of their financial position (profitability, loss). Insureds should highlight significant judgments or estimates made in determining the amount of insurance. This includes the basis for assessing the loss, damage (total, partial) and any assumptions used in calculations for compensation for losses. The article analyzes problematic practical aspects of accounting for legal relations of enterprises related to insurance of their property, interruption (suspension) of activity and liability between third parties in case of losses. Priority areas of accounting for compensation payments and their reflection in financial reporting and its improvement are determined. The accounting process of three common types of insurance compensation is highlighted: property damage, interruption of activity and liability to third parties.