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When inventory (stock) is destroyed and a physical count of damaged inventory is impossible, the estimated value of the loss is calculated through an analysis of the policyholder’s books and records.
What we do key takeaway:
- Request financial documentation to document beginning inventory, purchases, sales and cost of goods sold, and to incorporate that information into the loss analysis.
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What Are Out-of-Sight Inventory Losses?
Out-of-sight inventory losses happen when stock is damaged beyond recognition, making it impossible to count it. In such cases, the value of the lost inventory is estimated using the business’s financial records. This involves analyzing the following types of information: federal income tax returns, balance sheets, profit and loss statements, inventory records, purchase logs, sales data, and cost of goods sold.
