A gain contingency can be accrued when:
A) it is certain that a dispute will be settled in the company's favour.
B) it is probable that a future asset will be accrued by the company.
C) the amount of the gain can be reasonably estimated, and it is likely that a company will have a future claim to an asset.
D) Gain contingencies are not accrued.

Question

Quizplus · Accepted Answer

Gain contingencies are not accrued because accounting standards require that companies only record or disclose gains that are realized or realizable, to avoid overstating potential income. Accruing gain contingencies could lead to recognizing income that may never be realized, which goes against the conservatism principle in accounting.

A Gain Contingency Can Be Accrued When