Which of the following is correct with respect to a contingent liability that is "reasonably possible" but "cannot reasonably be estimated"?
A) It must be recorded and reported as a liability.
B) It does not need to be recorded or reported as a liability.
C) It must only be disclosed as a note to the ﬁnancial statements.
D) It must be reported as a liability, but not recorded.

Question

Quizplus · Accepted Answer

Contingent liabilities that are "reasonably possible" but "cannot reasonably be estimated" should be disclosed in the notes to the financial statements rather than being recorded as a liability on the balance sheet. This approach provides information to users of the financial statements without overstating liabilities.

Which of the Following Is Correct with Respect to a Contingent