A contingent loss should be reported in a disclosure note to the financial statements rather than being accrued if:
A) The likelihood of a loss is remote.
B) The incurrence of a loss is reasonably possible.
C) The incurrence of a loss is more likely than not.
D) The likelihood of a loss is probable.

Question

Quizplus · Accepted Answer

A contingent loss should be reported in a disclosure note to the financial statements rather than being accrued if the incurrence of a loss is reasonably possible. This means that the future events are likely to occur but are not certain. If a loss is probable and the amount can be reasonably estimated, it should be accrued. If the loss is remote, it does not need to be disclosed or accrued.

A Contingent Loss Should Be Reported in a Disclosure Note