The following is my discussion question and I do not understand it at all. Please help.
"Accounting for a Loss Contingency"
for a Loss Contingency"
Assume that there is a fire at a company's manufacturing plant that not only results in a total loss of the plant but also damages several surrounding businesses. The company anticipates material exposure from the adjacent businesses regarding both building loss and lost income claims. However, the company also expects this loss to be recovered through insurance. The company does not want to reflect this in their financial statements because it reasonably expects there to be no net financial impact. However, they are aware that the SEC Staff Accounting Bulletin 92 (SAB 92) generally prohibits offsetting insurance coverage before disclosing or accruing a loss contingency.
As chief financial officer (CFO), discuss the guidance and advice you would provide the chief executive officer (CEO) relative to the disclosures of a potential contingent loss.