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Natural disasters and other loss events: Accounting and financial reporting considerations

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The accounting for, and financial statement classification of, the impact of a major loss event, such as hurricanes, earthquakes, floods, or fires, can be complex and require an entity to make judgments, estimates, and disclosures that may be material to their financial statements. An entity needs to consider the immediate and direct impact of the loss event on its organization for matters such as asset impairments, insurance recoveries, and exposure to environmental remediation liabilities, which requires a full understanding of the entity’s insurance or other loss mitigation arrangements.

This publication discusses several of the accounting and financial reporting considerations related to major loss events and includes references to accounting guidance that an entity should consider when it determines the appropriate accounting treatment for major issues that frequently surface from these events, such as insurance arrangements, potential asset impairment, and the classification of losses and recoveries in the financial statements.