Pending lawsuits
A)Are always considered estimated liabilities
B)Should always be recorded
C)Should always be disclosed
D)Should be disclosed if payment for damages is probable but the amount cannot be reliably estimated
E)None of these

Question

Quizplus · Accepted Answer

Pending lawsuits should be disclosed in the financial statements if payment for damages is probable but the amount cannot be reliably estimated. Recording the lawsuit as a liability would only be appropriate if the amount could be reasonably estimated. If the likelihood of a lawsuit is remote, disclosure may not be required. Therefore, option D is the best choice.

Pending Lawsuits