Which of the following statements regarding contingencies is true?
A)Contingencies that are probable and estimable must be recorded before the outcome of future events.
B)Contingent assets,if probable and estimable,are treated in much the same way as contingent liabilities.
C)The accounting principle that determines whether a contingent asset is recorded is that of materiality.
D)Contingencies that are not estimable should not be disclosed even if probable.

Question

Quizplus · Accepted Answer

Contingencies that are probable and can be estimated must be recorded in financial statements before the actual outcome of the future events is known. This is in accordance with accounting standards, which require that if it is probable that an asset has been impaired or a liability has been incurred, and the amount of the loss can be reasonably estimated, it should be recorded in the financial statements.

Which of the Following Statements Regarding Contingencies Is True