New Assignment Form
Contact Us
Stay up to date with our latest insights and resources
Learn More
Stay up to date with our latest insights and resources
Learn More
Stay up to date with our latest insights and resources
Learn More
Stay up to date with our latest insights and resources
Learn More
  • There are no suggestions because the search field is empty.

Beyond the Books: How Industry Data Can Be Used to Arrive at More Accurate Loss Measurements

Use-of-Industry-Data_blogImg-1What happens if a business is impacted by external economic forces, during a loss period, which are not reflected in the historical financial records? Examples of these economic forces might include the 2008 recession, the COVID-19 Pandemic, or various catastrophic weather events, such as hurricanes, earthquakes, or floods.

Calculating Business Income Loss and Economic Damage Measurements

As forensic accountants, we are often tasked with providing our insurance and litigation clients with business income loss or economic damage measurements. Our objective is to determine the loss or damages amount by considering all pertinent data available. Our measurement is often based on the historical financial information of the entity. However, it is sometimes appropriate to incorporate industry data into the calculus to arrive at the most reasonable assessment of damages. 

There are certain scenarios where the use of industry data can be particularly helpful: 

  • Businesses with little or no historical financial documentation, such as a new business which has just begun operating or when typical documents are otherwise not available.
  • A business which is highly sensitive to external market forces impacting their sales and/or expenses.
  • The occurrence of significant general or specific economic events which are likely to cause a deviation from historical financial performance. Examples of these economic events might include the 2008 recession, the COVID-19 pandemic, or catastrophic weather events such as hurricanes, earthquakes, or floods.

Examples of Available Industry Data 

There are many different types of industry data, from various sources, which could be incorporated into a business income loss measurement or damages calculation.  Some examples include:

Regional Gasoline/Diesel Fuel Pricing

This data is publicly available on the U.S. Department of Energy website and can be useful when there are periods of significant gasoline price increase or decrease during the measurement period.

Hotel Market Reports

These reports are typically available by subscription only; however, many hotels subscribe and can readily access them. The market reports contain information including occupancy data and average daily rates for the impacted property and a competitor analysis for a group of similar hotels in the same geographic area. This can allow the forensic accountant to determine the impact of unusual economic events on room occupancy and rates in the market, while the loss location is partially, or totally, suspended.

Commodities Pricing

A business which is heavily reliant on various commodities for manufacturing inputs, or a business which manufactures a commodity for sale, can be impacted by market forces for these goods. For example, lumber, copper, aluminum, steel, oil, and other commodities can be subject to significant price fluctuations which could impact the profitability of the business. A large variety of resources and publications are available online to review specific commodity pricing.  

Industry Standard Profit Margin 

There is information available both publicly, and by subscription, which provide profit margin, operating expense, and balance sheet data for many different types of industries in various regions. This can be useful when evaluating a loss involving a new business or a business that otherwise lacks sufficient historical financial documents.

Currency Exchange Rates

Companies which have significant international operations can be impacted by fluctuations in currency exchange rates. The forensic accountant may choose to consider the impact on profitability caused by stronger or weaker trends in the currency, which forms the basis of the business’s financial reporting. Current and historical exchange rates can easily be accessed online from central banking authorities. For example, the European Central Bank and United States Federal Reserve. 

Commercial and Residential Real Estate Trends

Claims involving commercial or residential real estate businesses can be impacted by industry trends on vacancy and rental rates. This information can be obtained from a variety of publicly available sources. This information could be especially useful for a rental property which has limited operating history or in Builder’s Risk insurance claims. 

Government Collected Statistics

There are numerous economic statistics which are tracked by governmental bodies which may be helpful in arriving at the most reasonable assessment of damages. These include, but are not limited to, sales and occupancy tax data, birth/death rates, new housing starts, the Consumer Price Index (a measure of inflation), and the Federal Funds or Prime Lending Rates (a measure of interest rates on loans). Some of these statistics may be gathered at the federal, state, county, or local levels. This is generally macro-level data, so it may not always be pertinent for a given scenario. However, this data can be valuable especially when we are able to obtain it for specific geographic areas which are consistent with a business’s location.

Loss Measurement Case Studies

As outlined above, there are many circumstances when utilizing industry data, to supplement a business’s own financial records, will lead to a more accurate financial projection. To further illustrate this point, below we have outlined a few real-world situations and business types where utilizing industry data is likely to enhance the accuracy of a loss measurement.

Gasoline Stations

As every consumer is certain to experience, gasoline prices, like all commodities, fluctuate regularly. In many evaluations, a sales projection is developed based on historical sales achieved, including consideration for any seasonal or general market trends, and compared to actual sales during the loss period to establish the sales shortfall. However, when dealing with a commodity-based product, like gasoline, this approach may give a misleading result. 

For example, assume that a gasoline station with four fuel pumps experiences a loss when a vehicle strikes and damages two of the fuel pumps. Directly prior to the loss, the gasoline station regularly generated gross sales of $2,500 per day.  Now consider that during the loss period, fuel sales are reduced in half, down to$1,250 per day. In this instance, assume that the station only records gross sales by value and does not regularly record the volume of sales.


Daily Avg.

Loss Period 
Daily Avg.


Corrected Sales
Loss Valuation

Fuel Sales $





Avg. Price per Gallon
(per Industry Research)





Estimated Fuel Sales (Gallons)





The table above illustrates that a simple comparison of the pre and post loss total daily sales value would result in a calculated sales loss of $1,250 per day. Conversely, a more accurate approach would be to compare the pre and post loss fuel sales volume and apply loss period pricing. This approach would measure a sales loss of $833 per day, which represents a more accurate quantification of the loss. 

Utilizing industry data in the scenario above, including publicly available information from the U.S. Department of Energy, would allow the evaluator of the loss to quantify the loss more accurately by taking into consideration normal commodity price fluctuations. Further, even though the business does not normally maintain fuel sales by volume, by relying on an independent industry pricing source, fuel volumes can be reasonably estimated by dividing total fuel sales by the corresponding period price per gallon. 

While the example above specifically focused on gasoline sales, the underlying principles relate to all businesses trading in commodities. It is critical when evaluating a loss involving commodities or products with dynamic pricing that consideration be made for non-loss related changes in pricing throughout the loss period.    


Like many hospitality businesses, hotels regularly experience fluctuations in demand associated with seasonality, area weather or other special events.  For example, consider a hotel located in a seasonal resort area which experiences peak occupancy in the summer and typically has lower levels of occupancy in the fall and winter months.  Assuming the hotel experienced a significant loss event, resulting in a complete closure of the property, historical occupancy records would allow the accountant to appropriately consider the normal seasonal fluctuations in demand/occupancy. However, if there was a significant abnormal event in the surrounding area, the hotel’s own historical occupancy records may not appropriately reflect the likely performance of the property during the loss period. Take for example a significant climate event, such as the recent Caldor wildfire, occurring in the Lake Tahoe area. An event such as this would likely lead to evacuations and decreased vacation travel, leading to reduced demand for hotel rooms, during the summer season when the hotel typically had elevated levels of occupancy.  

In this circumstance, utilizing industry data such as the above-mentioned hotel market reports, would provide an insight into the impact of the climate event on overall market demand. If a clear correlation is identified between the event and changes in market demand experienced by the competitor analysis, a revision to the anticipated loss period occupancy may be warranted.  

When utilizing industry data, especially competitor performance, it is important to be aware of potential impacts to the industry data caused by the loss event itself. A loss at a hotel may result in increased occupancy at their competitor’s properties due to the lack of available rooms at the impacted property. For insurance losses, it is also critical to appropriately reflect any policy provisions regarding the consideration for changes in market demand caused by the loss event itself.

Large Scale Economic Trends 

In order to accurately evaluate a business income loss or calculate economic damages, consideration should be provided for economic factors, which likely would have impacted a business’s operations even if the loss event had not occurred. In relation to previously referenced examples of an economic recession or the impact of the COVID-19 pandemic, consumer spending behavior is likely to be significantly altered. Some industries may benefit from such events, while others may be significantly hampered.  It is important to consider the unique circumstances of each incident and the underlying business. 

During the initial phase of the COVID-19 pandemic, in 2020, many jurisdictions implemented various restrictions on restaurants. For example, some restaurants could operate with limited dine-in seating capacity or with only take-out/delivery options. In our experience, we found that many restaurants which did not historically offer take-out/delivery dining options began doing so to maintain some operational status. Further, many restaurants which did have take-out/delivery sales pre-pandemic experienced a significant increase in associated sales, in response to governmental orders or changing consumer preferences. In these instances, even the most detailed historical sales records alone would not allow for an accurate loss evaluation given the unique circumstances taking place. 

In response to the above scenarios, utilizing a restaurant’s historical records in conjunction with governmental or large-scale industry data may allow the forensic accountant to more accurately reflect the likely performance of the business but for the loss event. One example would be analyzing overall trends in restaurant sales based on sales tax collection data. The availability and detail of this information varies significantly from state to state. However, sales tax data can often be isolated for specific industries and in specific regions. In response to the COVID-19 pandemic, utilizing food & beverage trends, based on sales tax data for a specific state or county, could be used by the forensic accountant to assess the impact of the COVID-19 pandemic on the business had the loss event not occurred. 

Using Industry Data Results in More Accurate Loss Measurements

It’s critical when evaluating a business income loss, or calculating economic damages, to understand the unique characteristics of the business and the external forces that would impact performance had the loss event not occurred. Loss measurements can often be enhanced and refined by supplementing a business’s historical accounting records with industry data.  As discussed above, there are many different types of industry data, from numerous sources, which could be incorporated into a loss measurement. Using industry data, along with historical financial information, can be an important tool in arriving at an accurate assessment of damages.

subscribe to forensic edge

This article was co-authored by Eric Rapp, CPA, Manager in our Investigative Accounting and Litigation Support Group. Eric joined Meaden & Moore in 2012 and has focused his career exclusively on servicing the insurance industry and legal profession.

Since joining Meaden & Moore in 1999, Christian has focused his career exclusively on servicing the insurance industry and legal profession. His experience includes work on commercial insurance claims and litigation support involving property damage, business interruption, extra expenses, and loss of profits in a variety of industries.

Search the Blog

  • There are no suggestions because the search field is empty.