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 reasonably possible 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 but 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

When the outcome of a contingent liability is judged to be reasonably possible but the loss cannot be reasonably estimated, a disclosure in the footnotes is the appropriate course of action. This is because the contingent liability does not meet the criteria for recognition in the financial statements, but it is important to provide information about the nature of the event and its potential impact on the company's financial position.

A Disclosure of a Contingent Liability in the Footnotes Is