Which of the following loss contingencies ordinarily will NOT be accrued as liabilities?
A) Pending lawsuits whose outcome is uncertain.
B) Guarantees of indebtedness of others.
C) Disputes over additional income taxes for prior years.
D) None of these will be accrued.

Question

Quizplus · Accepted Answer

None of these loss contingencies will be accrued as liabilities. Accrual of liabilities is only appropriate when probable and the amount can be reasonably estimated. Pending lawsuits, guarantees of indebtedness, and disputes over taxes may or may not result in a loss, and the amount of the loss may be difficult or impossible to estimate, making it inappropriate to accrue them as liabilities.

Which of the Following Loss Contingencies Ordinarily Will NOT Be