CERTYNEX IFRS ACADEMY

An entity's reporting date is 31 December 20X1. In October 20X1, a fire destroys a warehouse with a carrying amount of 40,000. On 10 December 20X1, the insurer agrees in writing to pay compensation of 55,000, paid in January 20X2. A replacement warehouse will be built in 20X2. What treatment applies in the 20X1 financial statements?

A 40,000 loss in 20X1; the 55,000 compensation in profit or loss in 20X2, when received.

A 40,000 loss and 55,000 of compensation income, recognised separately in profit or loss for 20X1.

No entry in 20X1; the compensation will be deducted from the cost of the replacement warehouse.

55,000 of compensation income in 20X1; the warehouse remains recognised until it is rebuilt.