Which of the following best exemplifies a contingency that is reported in the notes to the financial statements?
A) Losses from potential future lawsuits
B) Loss from a lawsuit settled out of court prior to the end of the fiscal year
C) Warranty claims on future sales
D) Estimated loss from an ongoing lawsuit

Question

Quizplus · Accepted Answer

The estimated loss from an ongoing lawsuit is a contingency that is reported in the notes to the financial statements because it is a potential liability that may or may not arise in the future but could have a material impact on the company's financial position. The other options may also be disclosed in the notes, but they are not as clear examples of contingencies.

Which of the Following Best Exemplifies a Contingency That Is