Under what condition should a pending lawsuit be recognized as a liability on a company's balance sheet?
A)The amount can be reasonably estimated.
B)The outcome is probable.
C)The outcome is reasonably possible.
D)The outcome is probable and can be reasonably estimated.

Question

Quizplus · Accepted Answer

A contingent liability should be recorded in the financial statements as a liability if the outcome is considered probable and the amount owed can be reasonably estimated.If it is considered only reasonably possible,it is only disclosed in the notes to the financial statements.

Under What Condition Should a Pending Lawsuit Be Recognized as a Liability