A company has a contingent loss that can be estimated and has a probable chance of occurrence. What reporting does FASB require regarding this contingency?
A) It should be reported in the notes to the financial statements.
B) It should be ignored until the actual loss occurs.
C) It should be accrued, reported on the financial statements and disclosed in the notes to the financial statements.
D) Nothing is required since there is only a probable chance of occurrence.

Question

Quizplus · Accepted Answer

FASB requires that contingent losses that can be estimated and have a probable chance of occurrence should be accrued and reported on the financial statements. These losses should also be disclosed in the notes to the financial statements. Ignoring the contingency until the actual loss occurs or not reporting it is not allowed by FASB.

A Company Has a Contingent Loss That Can Be Estimated