CP 15 15–BUSINESS INCOME REPORT/WORKSHEET

(December 2025)

INTRODUCTION

The Insurance Services Office (ISO) CP 15 15–Business Income Report/Worksheet is required when selecting the Agreed Value Option or when attaching the Premium Adjustment Form to any Business Income Coverage forms. Its use for other reasons is optional. Businesses with coinsurance-based business income coverage should consider completing this form to evaluate their operations and determine suitable insurance limits.

ACCOUNTING METHOD

Any inventory valuation method, such as Last In, First Out (LIFO), First In, First Out (FIFO), or another accepted approach, may be used provided it is applied consistently to both beginning and ending inventories.

AGREED VALUE

If the Agreed Value Option is chosen, the named insured or a qualified representative must certify the worksheet is accurate. Entries for the total agreed value and the desired coinsurance percentage must also be included.

PREMIUM ADJUSTMENT (REPORTING FORM)

When CP 15 20–Business Income Premium Adjustment is attached, it serves as both the initial worksheet and the final report. The named insured submits the initial worksheet to the insurance company when CP 15 20 is first attached, as it serves as the basis for calculating the initial premium. The insured must then provide the final report to the insurer within 120 days after coverage ends or is canceled. This final report is used to finalize the premium calculation.

Related Article: CP 15 20–Business Income Premium Adjustment (Reporting Form)

FINANCIAL ANALYSIS

The worksheet allows for a two-part analysis.

·         The first column (Ending) is for recording income and expenses for the most recent 12 months, and ending at the coverage start date or the latest policy anniversary, whichever comes last.

·         The second column (Beginning) is for estimating income and expenses for the next 12 months following the initial period.

Each set of columns includes non-manufacturing and manufacturing operations.

·         ISO describes non-manufacturing operations as those mainly involving the sale or storage of goods and/or merchandise, or primarily providing services.

·         Businesses using machinery for packing, shipping, minor repairs, or altering goods are classified as non-manufacturing, provided these activities are incidental to a primarily non-manufacturing risk.

·         Both manufacturing and non-manufacturing columns can be used if the named insured is involved in both types of operations.

COMPLETING THE WORKSHEET

The Business Income Report/Work Sheet Financial Analysis section has 12 steps, labeled A through L.

·         The current 12-month values should be entered into the “Ending” period or the first set of columns.

·         The estimated values for the upcoming 12-month period should be entered into the “Beginning” period columns or the second set of columns.

A. Gross Sales

All calculations begin with gross sales, with subsequent steps involving subtracting from or adding to this amount.

B. Deduct Finished Stock Inventory

This relates only to manufacturing risks. The starting inventory of finished stock for the period is subtracted. This value is calculated based on the sales price, not the insured’s cost.

C. Add Finished Stock Inventory

This relates only to manufacturing risks. The finished stock inventory at the end of the period is then added in the calculations. This amount is determined by sales value, not the named insured’s cost.  

D. Gross Sales Value of Production

This relates only to manufacturing risks.

Example: Harvey’s Products calculates its business income exposure for the past year.

·         Gross sales from January 1, 2025, to January 1, 2026, totaled $1,000,000.

·         The finished inventory totaled $125,000 on January 1, 2025, and decreased to $25,000 by December 31, 2025.  

Ø  $125,000 of the sales came from inventory already produced; this amount must be subtracted.

Ø  $25,000 of inventory produced during the period but not yet sold should be added back, as it was part of the production year.  

$1,000,000

Annual Gross Sales

Subtract $125,000

Inventory produced prior to current term

Add $25,000

Inventory produced during current period

$900,000

Gross Sales Value Of Production

The projection for 2026 indicates a 15% rise in gross sales, with the final finished inventory anticipated to reach $25,000.  

·         Projected 15% growth expected; $900,000 x 15% ($135,000) = $1,035,000.

·         Estimated inventory of $25,000 at both the beginning and end of the year equals $25,000.

·         Total Estimated Gross Sales for 2025 = $1,150.00

 The estimated gross sales for 2026 are $1,150,000, with no deductions, since the starting and ending inventories are both $25,000.

E. Deduct

All of these are deducted because they do not continue during a business interruption.

F. Net Sales or Net Sales Value of Production                

Non-manufacturing risks are recorded in Net Sales, which is the difference between A. and E.

Example: Gloria’s Florist calculates its business income exposure for the past year.

·         Step A. Gross sales for June 1, 2024, to June 1, 2025, were $1,000,000.

·         Prepaid Freight does not apply.

·         However, the following do apply:

o   $75,000 in returns and allowances

o   $25,000 in discounts

o   $50,000 in bad debts and collection expenses

·         Adding the costs above results in a total of $150,000.

This results in the gross sales from Step A ($1,000,000) being reduced by $150,000, leading to Net Sales of $850,000.

The estimate is that gross sales will increase by 15%, and deductions will stay the same as last year. Therefore, the net sales estimate for the next year is $1,000,000.

1,000,000 x .15 increase in sales = $1,150,000 - $150,000 deductions = $1,000,000 Net Sales for new term.

Manufacturing risks are included in Net Sales Value of Production, which is the difference between D and E.

Example: Continuing the Harvey’s Products example above:

Harvey’s has:

·         $10,000 in prepaid freight

·         $10,000 in returns and allowances

·         $25,000 in discounts

·         $5,000 in bad debts and collection expenses.

Adding the costs above results in a total of $50,000, which is then deducted from the $900,000 Gross Sales of Production in Step D. As a result, the Net Sales Value of Production is $850,000.

Harvey’s estimates these deductions will remain the same in the upcoming year, so the $50,000 is deducted from the projected $1,150,000, resulting in a total Net Sales of Production of $1,100,000 for the new term.

G. Add

Other earnings received are entered in this section.

Examples include:

·         commissions

·         rental income

·         discounts received from suppliers

·         similar or related revenue

However, this section does not include investments or rental income from properties not covered in the insurance coverage.

H. Total Revenues

Example: Harvey’s Products earned $50,000 in rents and $50,000 in supplier discounts. Harvey’s adds them together to arrive at a total of $100,000. This amount is added to the Net Sales Value of Production, resulting in a Total Revenue of $950,000.

($850,000 Net Sales Value of Production + $50,000 rents + $50,000 discounts = $950,000)

Harevey’s estimates rents will increase by 20% to $60,000, while suppliers’ discounts will shrink by 10% to $45,000, resulting in an estimated Total Revenue of $1,205,000.

($1,100,000 estimated sales next term + $60,000 rents + 45,000 discounts = $1,250,000)

 

Example: Gloria’s Florist earned $25,000 in commission, $50,000 in rents, and $25,000 in supplier discounts. Gloria’s adds this total amount of $100,000 to its Net Sales. As a result, the Total Revenue is $950,000.

($850,000 + $25,000 commissions + $50,000 rents + $25,000 discounts = $950,000)

Gloria’s estimates commission will increase to $30,000, rents will decrease to $25,000, but there will be no change in supplier discounts. The estimated Total Revenue is $1,080,000.

($1,00,000 + $30,000 commission + $25,000 rents + $25,000 discounts = $1,080,000)

I. Deduct

The values of the following five categories are treated as deductions:

This amount is calculated and analyzed in the Supplementary section.

This refers to services provided by outsiders that do not continue under contract after a covered loss occurs.

Manufacturing risks can deduct these expenses using CP 15 11 — Power, Heat, and Refrigeration Deduction. This is applicable only if the manufacturer is not contractually obligated to continue them after a loss.

This represents a substantial amount in every operation. There is an option to either exclude all ordinary payroll expenses entirely or limit them to a specified number of days. This is achieved through CP 15 10–Payroll Limitation or Exclusion.

These are calculated in the Supplementary Section, and an analysis is provided below.

J. 1. Business Income Exposure for 12 months

The items in I. Deduct are subtracted from H. Total Revenues.

Example:

Harvey’s Products determines the following for the previous 12 months:

·    cost of goods sold is $300,000

·    value of services purchased is $50,000

·    Harvey’s does not purchase the separate endorsements.

This results in its business income exposure of $600,000 ($950,000 - $350,000).

Beginning estimates for the next 12-month period:

Harvey’s estimates the following:

·    cost of goods sold at $345,000

·    services value at $52,500

This results in an estimated business income exposure of $807,500 ($1,205,000 - $397,500).

 

Example:

Gloria’s Florist determines the following for the previous 12 months:

·         cost of goods sold is $500,000

·         value of services purchased is $75,000

·         ordinary payroll exclusion, which excludes payroll of $150,000

This results in an estimated business income exposure of $225,000 ($950,000 - $725,000).

Beginning estimates for the next 12-month period:

Gloria’s estimates the following:

·    cost of goods sold is $525,000

·    value of services is $86,250

·    ordinary payroll exclusion, which excludes payroll of $175,000

This results in an estimated business income exposure of $468,750 ($1,080,000 - $611,250).

J. 2. Combined

This entry applies to both manufacturing and non-manufacturing businesses. In this step, operations from both are combined.

K. Additional Expenses

These expenses are included in the estimate only because they are considered as extra limits in the event of a loss. They will not be factored into any business income coinsurance calculation.

The additional costs that might be necessary to prevent business suspension and keep operations running should be identified.

Related Article: Extra Expense Worksheet

These options are only useful if there are remaining coverage limits after paying for a business income loss. It is necessary to determine how long it will take to restore the revenue level prior to the loss.

Examples:

  • Harvey’s Products does not think it needs coverage for any additional expenses.
  • Gloria’s Florists adds $50,000 for the extra expense and $25,000 for the extended period of indemnity.

L. Total of J. and K.

Examples:

·         Harvey’s Products estimated 12-month business income exposure is $807,500. It must now determine the applicable coinsurance percentage and the corresponding insurance limit.

·         Gloria’s Florist estimated 12-month business income exposure is $468,750, with an additional expense exposure of $50,000 and $25,000 allocated for an extended indemnity period. The total exposure sums to $543,750.

The next step is to determine the correct coinsurance percentage and insurance limit. The coinsurance calculation for Gloria’s is based on $468,750, as the additional expenses and extended indemnity are not included in this calculation.

SUPPLEMENTARY INFORMATION

Cost of Goods Sold

Calculating the cost of goods sold consists of the following three steps:

1.      Inventory at the beginning of the year

Manufacturing risks include the value of raw materials and work-in-process stock, but not finished stock. The entire inventory of non-manufacturing risks is included.

The following items are added to this figure:

·         Cost of raw materials, including shipping costs. This applies only to manufacturing risks.

·         Cost of factory supplies used in manufacturing operations. This applies only to manufacturing risks.

·         Cost of goods sold, including transit fees. This refers to the cost of goods sold that are not manufactured.

·         Cost of other supplies used in manufacturing, including transit fees.

2.      Cost of goods available for sale

This is the total inventory and all items listed above. Inventory at year-end is subtracted from this figure. Manufacturing risks include raw materials and work-in-process but exclude finished goods.

3.      Costs of goods sold

This figure is entered in Step I. in the primary calculation section above.

Mining Properties Special Deductions

Royalties

All royalties not specifically covered should be listed.

NOTE: An endorsement covering royalties is not available. Therefore, they must be included in the declarations or added through a manuscript endorsement.

The formula for special mining deductions is as follows:

1.      Actual depletion (also referred to as unit cost or cost depletion). It is not a depletion percentage.   

2.      Welfare and retirement fund charges (based on tonnage).   

3.      Hired trucks. 

4.      Add the limits from Steps 1. through 3. This sum becomes the Special Mining Deductions and is then entered into Step I. of the primary calculation section above.