A fire destroyed one of Government A's fire stations, which had a net book value of $635,000. The government received an insurance settlement of $400,000 in the same fiscal year the fire had occurred. Which of the following best describes the external financial reporting in the year of the fire?

Question

Quizplus · Accepted Answer

The fire resulted in a loss of $635,000 (net book value of the fire station), but with the insurance settlement of $400,000, the net loss is $235,000. This loss should be reported in the government-wide financial statements since it is a significant event affecting the long-term financial position of the government. The loss should not be reported in the General Fund since the insurance settlement is considered a non-operating revenue and should be recognized as such. There is no need to report a special item in the government-wide financial statements since the loss is already accounted for. Additionally, there is no need to report the insurance settlement in the General Fund since it is not an operating revenue.

A Fire Destroyed One of Government A's Fire Stations, Which