A disclosure of a contingent liability in the footnotes is made rather than adjusting the financial statement accounts when:
A)the outcome of the event is judged to be probable and the loss can be reasonably estimated.
B)the loss can be reasonably estimated, but the outcome is unknown.
C)the outcome of the event is judged to be reasonably possible or the loss cannot be reasonably estimated.
D)the outcome is unknown and the loss is reasonably estimable but the entity does not want to book the loss.

Question

Quizplus · Accepted Answer

A contingent liability should be disclosed in the footnotes when the outcome of the event is judged to be reasonably possible or the loss cannot be reasonably estimated. If the outcome is judged to be probable and the loss can be reasonably estimated, then a liability should be recognized and recorded in the financial statement accounts. If the loss can be reasonably estimated but the outcome is unknown, a disclosure in the footnotes is still required, but a liability may also need to be recognized in some cases. If the outcome is unknown and the loss is reasonably estimable but the entity does not want to book the loss, this does not change the requirement to disclose the contingent liability in the footnotes.

A Disclosure of a Contingent Liability in the Footnotes Is