Assume that a company is facing a loss contingency. GAAP requires the company to recognize a liability even if the company cannot determine whether or not the event has occurred.

Question

Quizplus · Accepted Answer

GAAP requires a company to recognize a liability for a loss contingency only if it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. If the company cannot determine whether the event has occurred, it cannot recognize a liability.

Assume That a Company Is Facing a Loss Contingency