CASE SUMMARY of economic damage The focus of this case is to provide a fundamental due to a personal injury. The aim is to restore the injured ore the injured party to the positie in had the injury not occurred. e suffered an injury on 06/3 juries she had to quit her work until six months The facts of the case are as follows: Jane Doe suffered an ini X1 at the age of 44.50. Due to the gravity of her injuries she had job at Company A immediately. She remained out of work until jater when she was able to secure a new job that accommodated her di at Company B on 01/01/X2. Prior to Jane Doe's injury, her annual salary at Company A was $30.000 and her wages were growing annually at the average rate of inflation (3.35%). I addition to Jane Doe's base salary, she also received fringe benefits (e.g., health insurance, social security) in the amount of 14.50% of her base salary. During the six months that Jane Doe was unemployed she did not receive any remuneration (i.e., short-term disability, unemployment). Jane Doe secured an alternate job at Company Bon 01/01/X2 that catered to her permanent physical limitations. Her annual salary at Company B was $19,500. Her salary at Compan was expected to grow at the average rate of inflation (3.35%). In addition to base salary at Company B she received limited benefits in the amount 10.50% of her base salary. ASSIGNMENT A law firm has hired you as the forensic accountant to P damages due to the injury that Jane Doe sustained. this assignment, the following guidance and assumptions at to prepare a calculation of sustained. For purposes of imptions have been provided: Dainages 219 1. Despite Jane Doe's injury, she Despite Jane Does injury, she expects to continue working until the of 65. Your objective is to calculate the economic damages that lane will experience over her work-life expectancy (age 65) due to lost wages and benefits. Published statistics illustrate that Jane Doe's life expectancy, based on her age and education, is 85 years of age. 3. As a result of Jane Doe's injury, she can no longer perform household services. Legal counsel has asked you to calculate the amount of economic damages needed to replace the loss of household services over Jane Doe's! remaining life expectancy. 4. Jane Doe's trial date is scheduled on the two-year anniversary of her injury. Economic damages calculated from that date forward will need to be discounted to present value. nic damages calculated from unted to present value. injury. LLUNUInic dam to be discounted to pr Mulled Med on the two-year and Jelated from that date forwawili Das eclosure A - Economic Damage Assumpti Name of injured are on Female dute of Personal Injury June 30,00 Date of Personal Injury feat Date Age at Date of Trial Worklife Expectancy ARE - 4450 Age-4650 Age - 65.00 Age - 85.00 Life Expectancy Gowth Rate 3.35% 25.65% 14.50% Tax Rate Benefits as a % of Annual Salary Company A Company B Risk of Unemployment Discount Rate (Risk-Free Rate of Return) 10.50% 4.80% 4.50% ncome Wages: Annual Salary at Company A (Pre-Injury) Wages: Annual Salary at Company B (Post-Injury) $ 30,000.00 $ 19,500.00 usehold Replacement (Average per/hr) $ 1450 Food Preparation / House Replacement Hours per Annual Household Rep con/Housekeeping Workers (Average per/hr) hours per year (10 hours p/week x 52 weeks) sehold Replacement Cost (520x $14.50) 520 Hours $ 7.540.00 Net Economic Day 11+ Discoun t sent Value Formula ENCLOSURE B - PROJECTED INCOME PRE INJURY EARNING CAPACITY BEFORE DISCOUNTING (c) Period by Age Projected Gross Wages Fringe Benefits Net Economic Risk of Benefit Unemployment Projected in TO From 44.50 45.00 46.00 46.50 47.00 48.00 49.00 50.00 51.00 45.00 46.00 46.50 47.00 48.00 49.00 50.00 51.00 52.00 8888888888 888888888 63.00 62.00 63.00 64.00 65.00 64.00 Projected gross wages that Jane Doe would have earned, but for the injury, would have grown each year by be average rate of inflation. Jane Doe's effective tax rate, which includes Federal, State, Social Security & Medicare taxes, would hav e her gross wages had an injury not occurred. Working condition fringe benefits that Company A would have provided to Jane Doe, but for the injury. Would been in addition to her gross wages. The net economic benefit that Jane Doe would have earned, but for her iniury, represents her gross wage adjusted for taxes and employer provided working condition fringe benefits. The net economic De me income stream that would be subject to loss in the event of unemployment, had an injury not had she remained employed with Company A The risk of unemployment dat industry worker are in the same industry have an unemployment rate that you derived from the US Departner Statistics. The risk of unemployment reduces the net economic benefit The net economic benefit adiusted for the risk of unemployment represents the income projected to earn through work life expectancyhed she not suffered from a personal injury The net economic beneft represents injury not occurred, and ame field as Jane Doe (Company A & Company derived from the US Department of Labor resents the income that Jane Doe was ENCLOSURED - HOUSEHOLD REPLACEMENT COST BEFORE DISCOUNTING Cost to Replace House Hold Services Period by Age 44.50 $ 45.00 46,00 46,50 47.00 48,00 46.00 46.50 47.00 48.00 49.00 50.00 51.00 52.00 53.00 54.00 55.00 56.00 57.00 58.00 59.00 60.00 61.00 62.00 63.00 64.00 65.00 66.00 67.00 63.00 69.00 70.00 71.00 72.00 73.00 74.00 75.00 78.00 77.00 78.00 79.00 80.00 81.00 82.00 83.00 50.00 51.00 52.00 53.00 54.00 55.00 56.00 57.00 58.00 59.00 60.00 61.00 62.00 63.00 64.00 65.00 66.00 67.00 68.00 69.00 70.00 71.00 72.00 73.00 74.00 75.00 76.00 77.00 78.00 79.00 80.00 81.00 82.00 83.00 84.00 85.00 84.00 On average prior to her injury, Jane Doe performed approximately 10 hours per week en household tasks. Aher her injury Doe could no longer perform any of her household tasks You researched the Occupational Employment Statistics publishes mean hourly wages for household workers in the same county that Jane Doe resides. Each year, the replace cost is projected to grow by the average rate of inflation The Valuation of Economic Damas 223 ENCLOSURE E - TOTAL ECONOMIC DAMAGES PAST & FUTURE ECONOMIC DAMAGES DISCOUNTED TO THE TRIALE Projected Income Projected income Period by Age HH Replacement Pre Injury Post injury Time to Economie Damages $ From 44.50 45.00 46.00 To 45.00 46.00 46.50 8.50 7.50 55.00 50 46.50 47.00 47.00 48.00 48.00 49.00 49.00 50.00 50.00 51.00 51.00 52.00 52.00 53.00 53.00 54.00 54,00 55.00 56.00 56.00 57.00 57.00 58.00 58.00 59.00 59.00 60.00 60.00 61.00 61.002.00 82.00 63.00 63.00 64.00 65.00 6.00 64.00 540 67.00 0.00 6.00 20 89.00 70.00 71.00 10.50 11.50 12.50 13.50 14.50 15.50 16.50 17.50 18.50 19.50 20.50 14.00 21.50 70.00 22.50 23.50 24.50 25.50 26.50 27.50 28.50 T2.00 74,00 76.00 31.50 32.50 79.00 35.50 37,50 Total Future Economic Damage WEE Total Economie Damages to Jane Doe 224 Case Studies in Forensic Accounting and Fraud Auditing Enclosure F - Summary of Economic Damages Due to Personal Injury on June 30, XXX Jane Doe Reference Enclosure E Total Past Economic Damages Total Future Economic Damages (at Present Value) Total Economic Damages Enclosure E Enclosure * Adapted from Vol. 8, No. 2, Special Issue, 2016 of Journal of Forensic & Investigative Accounting. CASE SUMMARY of economic damage The focus of this case is to provide a fundamental due to a personal injury. The aim is to restore the injured ore the injured party to the positie in had the injury not occurred. e suffered an injury on 06/3 juries she had to quit her work until six months The facts of the case are as follows: Jane Doe suffered an ini X1 at the age of 44.50. Due to the gravity of her injuries she had job at Company A immediately. She remained out of work until jater when she was able to secure a new job that accommodated her di at Company B on 01/01/X2. Prior to Jane Doe's injury, her annual salary at Company A was $30.000 and her wages were growing annually at the average rate of inflation (3.35%). I addition to Jane Doe's base salary, she also received fringe benefits (e.g., health insurance, social security) in the amount of 14.50% of her base salary. During the six months that Jane Doe was unemployed she did not receive any remuneration (i.e., short-term disability, unemployment). Jane Doe secured an alternate job at Company Bon 01/01/X2 that catered to her permanent physical limitations. Her annual salary at Company B was $19,500. Her salary at Compan was expected to grow at the average rate of inflation (3.35%). In addition to base salary at Company B she received limited benefits in the amount 10.50% of her base salary. ASSIGNMENT A law firm has hired you as the forensic accountant to P damages due to the injury that Jane Doe sustained. this assignment, the following guidance and assumptions at to prepare a calculation of sustained. For purposes of imptions have been provided: Dainages 219 1. Despite Jane Doe's injury, she Despite Jane Does injury, she expects to continue working until the of 65. Your objective is to calculate the economic damages that lane will experience over her work-life expectancy (age 65) due to lost wages and benefits. Published statistics illustrate that Jane Doe's life expectancy, based on her age and education, is 85 years of age. 3. As a result of Jane Doe's injury, she can no longer perform household services. Legal counsel has asked you to calculate the amount of economic damages needed to replace the loss of household services over Jane Doe's! remaining life expectancy. 4. Jane Doe's trial date is scheduled on the two-year anniversary of her injury. Economic damages calculated from that date forward will need to be discounted to present value. nic damages calculated from unted to present value. injury. LLUNUInic dam to be discounted to pr Mulled Med on the two-year and Jelated from that date forwawili Das eclosure A - Economic Damage Assumpti Name of injured are on Female dute of Personal Injury June 30,00 Date of Personal Injury feat Date Age at Date of Trial Worklife Expectancy ARE - 4450 Age-4650 Age - 65.00 Age - 85.00 Life Expectancy Gowth Rate 3.35% 25.65% 14.50% Tax Rate Benefits as a % of Annual Salary Company A Company B Risk of Unemployment Discount Rate (Risk-Free Rate of Return) 10.50% 4.80% 4.50% ncome Wages: Annual Salary at Company A (Pre-Injury) Wages: Annual Salary at Company B (Post-Injury) $ 30,000.00 $ 19,500.00 usehold Replacement (Average per/hr) $ 1450 Food Preparation / House Replacement Hours per Annual Household Rep con/Housekeeping Workers (Average per/hr) hours per year (10 hours p/week x 52 weeks) sehold Replacement Cost (520x $14.50) 520 Hours $ 7.540.00 Net Economic Day 11+ Discoun t sent Value Formula ENCLOSURE B - PROJECTED INCOME PRE INJURY EARNING CAPACITY BEFORE DISCOUNTING (c) Period by Age Projected Gross Wages Fringe Benefits Net Economic Risk of Benefit Unemployment Projected in TO From 44.50 45.00 46.00 46.50 47.00 48.00 49.00 50.00 51.00 45.00 46.00 46.50 47.00 48.00 49.00 50.00 51.00 52.00 8888888888 888888888 63.00 62.00 63.00 64.00 65.00 64.00 Projected gross wages that Jane Doe would have earned, but for the injury, would have grown each year by be average rate of inflation. Jane Doe's effective tax rate, which includes Federal, State, Social Security & Medicare taxes, would hav e her gross wages had an injury not occurred. Working condition fringe benefits that Company A would have provided to Jane Doe, but for the injury. Would been in addition to her gross wages. The net economic benefit that Jane Doe would have earned, but for her iniury, represents her gross wage adjusted for taxes and employer provided working condition fringe benefits. The net economic De me income stream that would be subject to loss in the event of unemployment, had an injury not had she remained employed with Company A The risk of unemployment dat industry worker are in the same industry have an unemployment rate that you derived from the US Departner Statistics. The risk of unemployment reduces the net economic benefit The net economic benefit adiusted for the risk of unemployment represents the income projected to earn through work life expectancyhed she not suffered from a personal injury The net economic beneft represents injury not occurred, and ame field as Jane Doe (Company A & Company derived from the US Department of Labor resents the income that Jane Doe was ENCLOSURED - HOUSEHOLD REPLACEMENT COST BEFORE DISCOUNTING Cost to Replace House Hold Services Period by Age 44.50 $ 45.00 46,00 46,50 47.00 48,00 46.00 46.50 47.00 48.00 49.00 50.00 51.00 52.00 53.00 54.00 55.00 56.00 57.00 58.00 59.00 60.00 61.00 62.00 63.00 64.00 65.00 66.00 67.00 63.00 69.00 70.00 71.00 72.00 73.00 74.00 75.00 78.00 77.00 78.00 79.00 80.00 81.00 82.00 83.00 50.00 51.00 52.00 53.00 54.00 55.00 56.00 57.00 58.00 59.00 60.00 61.00 62.00 63.00 64.00 65.00 66.00 67.00 68.00 69.00 70.00 71.00 72.00 73.00 74.00 75.00 76.00 77.00 78.00 79.00 80.00 81.00 82.00 83.00 84.00 85.00 84.00 On average prior to her injury, Jane Doe performed approximately 10 hours per week en household tasks. Aher her injury Doe could no longer perform any of her household tasks You researched the Occupational Employment Statistics publishes mean hourly wages for household workers in the same county that Jane Doe resides. Each year, the replace cost is projected to grow by the average rate of inflation The Valuation of Economic Damas 223 ENCLOSURE E - TOTAL ECONOMIC DAMAGES PAST & FUTURE ECONOMIC DAMAGES DISCOUNTED TO THE TRIALE Projected Income Projected income Period by Age HH Replacement Pre Injury Post injury Time to Economie Damages $ From 44.50 45.00 46.00 To 45.00 46.00 46.50 8.50 7.50 55.00 50 46.50 47.00 47.00 48.00 48.00 49.00 49.00 50.00 50.00 51.00 51.00 52.00 52.00 53.00 53.00 54.00 54,00 55.00 56.00 56.00 57.00 57.00 58.00 58.00 59.00 59.00 60.00 60.00 61.00 61.002.00 82.00 63.00 63.00 64.00 65.00 6.00 64.00 540 67.00 0.00 6.00 20 89.00 70.00 71.00 10.50 11.50 12.50 13.50 14.50 15.50 16.50 17.50 18.50 19.50 20.50 14.00 21.50 70.00 22.50 23.50 24.50 25.50 26.50 27.50 28.50 T2.00 74,00 76.00 31.50 32.50 79.00 35.50 37,50 Total Future Economic Damage WEE Total Economie Damages to Jane Doe 224 Case Studies in Forensic Accounting and Fraud Auditing Enclosure F - Summary of Economic Damages Due to Personal Injury on June 30, XXX Jane Doe Reference Enclosure E Total Past Economic Damages Total Future Economic Damages (at Present Value) Total Economic Damages Enclosure E Enclosure * Adapted from Vol. 8, No. 2, Special Issue, 2016 of Journal of Forensic & Investigative Accounting