A company should accrue a loss contingency only if the likelihood that a liability has been incurred is:
A) More likely than not and the amount of the loss is known.
B) At least reasonably possible and the amount of the loss is known.
C) At least reasonably possible and the amount of the loss can be reasonably estimated.
D) Probable and the amount of the loss can be reasonably estimated.

Question

Quizplus · Accepted Answer

A company should accrue a loss contingency only if the likelihood that a liability has been incurred is probable (meaning more likely than not) and the amount of the loss can be reasonably estimated. This is because accrued loss contingencies are recorded as an expense in the financial statements, and it would be inappropriate to record an expense for a potential liability that is only reasonably possible or unknown.

A Company Should Accrue a Loss Contingency Only If the Likelihood