If a potential loss on a contingent liability is unlikely and the event will not likely have a significant adverse financial effect,the liability should be
A)accrued and indicated in the body of the financial statements.
B)disclosed in footnotes but not accrued.
C)neither accrued nor disclosed in footnotes.
D)disclosed in the auditor's report but not disclosed on the financial statements.

Question

Quizplus · Accepted Answer

If a potential loss on a contingent liability is unlikely and the event will not likely have a significant adverse financial effect, it should neither be accrued nor disclosed in footnotes. This is because accounting standards typically require accrual or disclosure only when a loss is probable or reasonably possible and could have a material effect on the financial statements.

If a Potential Loss on a Contingent Liability Is Unlikely