Personal injury claims
In personal injury claims, the forensic accountant can assist in quantifying the damages.
Where an individual has incurred injuries that have affected the ability to work, then the usual method for calculating damages is projecting earnings and related benefits. The earnings and benefits are projected for the period the individual could have reasonably expected to work, but for the accident.
In calculating damages, post-accident earnings are compared to the projections. Individuals, however, do have an obligation to take reasonable steps to minimise the damages incurred, for example, finding alternative employment.
The focus is on lost earning capacity, rather than loss of earnings. As such, consideration is given to earnings growth and the probability of certain events, for example, promotion or redundancy.
The individual’s earning history prior to the event is an important source as a base for estimating earnings. Consideration needs to be given to overtime, bonuses, commissions and fringe benefits.
Any historical and future costs associated with the injury, such as medical costs, also need to be established. If an individual suffers a reduction in life expectancy, this may, in turn, reduce the working life expectancy. Actuarial assistance may be required.
Losses can include lost pension benefits, lost holiday pay, lost health insurance benefits, loss of personal possessions and loss of ability to perform household services, such as cooking and cleaning. Consideration also needs to be given for any living expense savings and tax rebates.
To arrive at a value of damages, at the date of the incident, projected earnings are discounted back to a present value.
Simon is a CA Accredited Business Valuation expert, Chartered Accountant and a Certified Fraud Examiner. Simon specialises in providing forensic accounting and valuation services. Prior to founding Lotus Amity, he was a Forensic Accounting partner with BDO Australia and led their National Forensics practice. He has worked as a forensic director for a major offshore forensic accounting practice which included assisting in multi-billion-dollar litigation in relation to the giant Bernie Madoff Ponzi scheme. Simon provides valuation services in disputes, for raising finance, for restructuring, transactions and for tax purposes.
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