3.7 Gain Contingency Disclosure

Even if insurance proceeds resulting in a gain or other gain contingencies are not recognized in the financial statements because of unresolved uncertainties, timely disclosure of the insurance gain contingency should be considered. Information disclosed might include (1) the nature of the gain contingency, including a description of any remaining uncertainties; (2) the parties involved; (3) the timeline of previous events; (4) an expected timeline for resolving the remaining uncertainties; and (5) the amount of the gain contingency, including consideration of uncertainties in the determination of the amount. If the entity is unable to determine the timeline for resolution or an estimate of the amount that will ultimately be realized, the entity may need to disclose the factors it considered in reaching these conclusions and update these disclosures in future financial statements as additional information becomes available.

The entity should take care to avoid providing misleading disclosures about the likelihood, timing, or amount of the potential gain contingency. Disclosures should also include the entity’s accounting policy for recognizing recovery proceeds of previously recognized losses as well as proceeds expected to be received in excess of previously recognized losses (see further discussion in Chapter 4).

For considerations related to gain contingency classification, see Section 4.8.