A possible loss from lawsuit is not reported on the balance sheet as a current liability.

Question

Quizplus · Accepted Answer

Possible losses from lawsuits are not reported on the balance sheet as current liabilities because they are considered contingent liabilities. Contingent liabilities are potential obligations that depend on the outcome of a future event, such as a lawsuit. They are not recognized on the balance sheet until it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated.

A Possible Loss from Lawsuit Is Not Reported on the Balance