An obligation that is contingent on the occurrence of a future event should be reported in the balance sheet as a liability if the
A) future event is likely to occur.
B) amount of the obligation can be reasonably estimated.
C) occurrence of the future event is at least reasonably possible and the amount is known.
D) occurrence of the future event is probable and the amount can be reasonably estimated.

Question

Quizplus · Accepted Answer

According to accounting standards, a contingent liability should be recognized as a liability in the balance sheet if the occurrence of the future event is probable and the amount can be reasonably estimated. This means that the likelihood of the event happening is high (more than 50%) and the amount of the obligation can be reasonably estimated. Therefore, only option D satisfies both of these criteria.

An Obligation That Is Contingent on the Occurrence of a Future