Question: In 20X6, Universal Company experienced the total loss of one of its assembly plants in the Midwest to a fire. The carrying amount (net book value) of the plant in the company's balance sheet at the date of the fire was $22 million (original cost of $34 million, less accumulated depreciation of $12 million). The company filed immediately a claim for recovery from the loss under its insurance policy. The policy provided an annual coverage limit of $28 million, and a per-occurrence deductible of $3 million. The insurance claim remained unsettled on the date Universal issued its 20X6 financial statements, First, state whether the company should recognize in its 20X6 financial statements a loss related to the fire, a recovery (gain) related to the insurance policy, or both. If so, indicate the amounts of such loss and/or recovery (gain). Then, provide your reasoning, by referring to the relevant:
Definitions of financial statement elements,
Basic principles of financial reporting, and the
Desired qualitative characteristics of accounting information