But while the labels and structures of claims vary, every commercial claim is either an income loss or an asset loss. That's because each loss ultimately finds its way onto one of the two primary accounting statements -- the income statement or the balance sheet. Income losses leave their mark on a company's income statement, while asset losses dent their balance sheets.
The label and structure of the claim just help those of us in the industry identify the guidelines in effect and who’s responsible for accepting the loss. So, to make sure the accounting reality of commercial claims is brought to the forefront, we attach straightforward identities to our services: income losses or asset losses.
When a business is interrupted, the stakes are high. The insurer needs accurate information to set reserves and make appropriate payments. For the affected business, time is of the essence - funds are needed to meet ongoing obligations and to minimize the long-term impact of the interruption. With so much at stake, the assistance of a forensic accountant is critical.
Our income loss services involve a thorough review of corroborative accounting documents. With the proper documents and our expertise, we determine the most appropriate method upon which to project sales, and use the projection to calculate the sales loss arising from the interruption. We also evaluate every expense and identify expenses that continue as normal, expense reductions resulting from the interruption, and any necessary extra expenses incurred. Throughout the process, we account for all of the conditions of the insurance policy. Our income loss services pertain to the following scenarios:
- Business income losses under business
owner and commercial property policies - Extra expenses, expenses to reduce
the loss and expediting expenses - Lost profits under commercial liability polices
Our asset loss services include: inventory, cash, accounts receivable and valuable papers. These assets have true physical identity since they reside at the business property. These assets also have an accounting identity, since their life stories are captured within various accounting documents such as balance sheets, property tax returns, income tax returns, purchase and sale agreements, and invoices. When misfortune strikes, assets are often stolen or destroyed beyond recognition. As forensic accountants, we track the paper trail of transactions that led to their accounting identities.
When dealing with lost assets, questions abound. Which assets were on-hand at the time of the loss? What was their value? Are the underlying documents substantive? Which assets remain? We answer all of those questions, along with the biggest question of all: what is the value of the loss? Throughout our evaluations, we are always on the lookout for errors in the company's accounting records. These errors act as "false scents" that may lead the untrained to the wrong conclusion.
We evaluate losses in connection with the following types of claims:
- Employee dishonesty under business owner
and commercial crime policies - Contents or receivables under business owner,
commercial property or inland marine policies - Property losses under general liability policies