A loss contingency should be accrued in a company's financial statements only if the likelihood that a liability has been incurred is:

Question

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A loss contingency should be accrued in a company's financial statements only if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. This is the most conservative approach and is in accordance with generally accepted accounting principles. Option A is incorrect because "at least remotely possible" is not a strong enough threshold for accruing a liability. Option B is incorrect because "reasonably possible" is still not as strong as "probable." Option C is incorrect because while the amount of the loss can be estimated, the threshold of "reasonably possible" is not strong enough.

A Loss Contingency Should Be Accrued in a Company's Financial