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Chapter 4 — Loss Recoveries

4.4 Determinable and Indeterminable Mix of Loss Recovery and Gain Contingency Models

4.4 Determinable and Indeterminable Mix of Loss Recovery and Gain Contingency Models

Under the determinable mix model, the probable recovery proceeds equal to the amount of the recognized loss should be accounted for by using the loss recovery model. Any expected proceeds in excess of the recognized loss should be accounted for as a gain contingency. When there is no clear evidence that the amount of the proceeds is a recovery of previously recognized losses or incremental costs (i.e., there is no direct linkage) or the amount of the loss or costs previously incurred is not objectively quantifiable (i.e., specifically identifiable), the gain contingency model would be applied to the entire amount of the recovery proceeds (also referred to as the indeterminable mix model). The determinable mix model, which encompasses both the loss recovery model and the gain contingency model, and the indeterminable mix model, which results in the application of the gain contingency model to probable recovery proceeds, are further illustrated below.