What is the correct treatment of an event if the likelihood is probable that a possible gain will result in an inflow of benefits?
A) The event must be disclosed.
B) A provision must be established for the event.
C) Management must use judgment in determining how to report the event.
D) The event does not need to be disclosed or a provision provided.

Question

Quizplus · Accepted Answer

When there is a probable likelihood of a possible gain resulting in an inflow of benefits, the event should be disclosed in the financial statements. This is because it provides useful information to users of the financial statements about potential future benefits, even though it is not recognized in the financial statements as an asset or income due to the uncertainty involved.

What Is the Correct Treatment of an Event If the Likelihood