Which statement about contingencies is correct?
A)If the future outcome is possible and reliably measurable,a provision is recorded.
B)If the future outcome is probable and reliably measurable,a provision is recorded.
C)If the future outcome is probable,a provision is recorded even if it is not reliably measurable.
D)If the future outcome is possible,a provision is recorded even if it is not reliably measurable.

Question

Quizplus · Accepted Answer

A contingency is a possible future event or condition that will have an impact on the financial statements. If the future outcome is probable, meaning it is likely to occur, and reliably measurable, meaning its financial impact can be estimated with reasonable accuracy, then a provision is recorded as a liability. Thus, option B is the correct statement about contingencies. Options A, C, and D are incorrect as they do not reflect the conditions required to record a provision for a contingency.

Which Statement About Contingencies Is Correct