Lily Smith (Lily) is the financial accountant for Home Equipment Limited (HE Limited), a garden equipment manufacturer that has its head office in Wellington, New Zealand, and operations in New Zealand, Australia, and Canada. HE Limiteds financial statements are prepared in accordance with New Zealand Equivalents to International Financial Reporting Standards. During the preparation of HE Limiteds financial statements for the year ended 30 June 2021, Lily considers this:

HE Limited owns a factory in Sydney, Australia. On 15 January 2021, the bushfire completely destroyed the factory in Sydney. The factory was insured. The directors of HE Limited submitted an insurance claim on 28 February 2021. The insurance company has acknowledged receipt of the claim forms; however, due to the large number of claims in the New South Wales region, the assessor will only be able to process HEs claim after the 30 June 2021 year end.

Determine how Lily would account for this item in HE Limiteds financial statements for the year ended 30 June 2021. Justify your response with specific references to NZ IAS 37 Provisions, Contingent Liabilities and Contingent Assets.