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      Question

      Claim payments net of subrogation recoveries are

      material. The entity reports claim cash flows on a gross basis. Can subrogation recoveries be offset in the operating section?
      A Yes, always Correct Answer Incorrect Answer
      B No, cash flows are presented gross unless policy allows netting for quick turnover items Correct Answer Incorrect Answer
      C Yes, if legally enforceable netting exists and practice is consistent Correct Answer Incorrect Answer
      D Only in financing activities Correct Answer Incorrect Answer
      E Only in investing activities Correct Answer Incorrect Answer

      Solution

      Net presentation permitted where cash receipts/payments reflect the same transaction and legal right to set off exists.

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