Companies should accrue an estimated loss from a loss contingency if information available prior to the issuance of financial statements indicates that it is reasonably possible that a liability has been incurred.

Question

Quizplus · Accepted Answer

According to accounting principles, companies should accrue an estimated loss from a loss contingency if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. "Reasonably possible" is a lower threshold and does not require accrual.

Companies Should Accrue an Estimated Loss from a Loss Contingency