Red Co. can estimate the amount of loss that will occur if a foreign government expropriates some of the company's assets in that country. If expropriation is probable, a loss contingency should be:
A) Disclosed but not accrued as a liability.
B) Disclosed and accrued as a liability.
C) Accrued as liability but not disclosed.
D) Neither accrued as a liability nor disclosed.

Question

Quizplus · Accepted Answer

If an expropriation is probable, a loss contingency should be disclosed and accrued as a liability, in accordance with GAAP. This means that the company should report the estimated loss as a liability on its balance sheet and disclose the details in its footnotes. This allows investors and other stakeholders to understand the potential impact on the company's financial position.

Red Co Can Estimate the Amount of Loss That Will Occur