A contingent liability should be disclosed in a note to the financial statements rather than being recorded if:

Question

Quizplus · Accepted Answer

Contingent liabilities are potential losses that may occur depending on the outcome of future events or circumstances. If the incurrence of a loss is reasonably possible or has a chance of occurring, it should be disclosed in a note to the financial statements rather than being recorded in the financial statements. If the likelihood of a loss is remote, it does not need to be disclosed or recorded. If the incurrence of a loss is probable or likely, it should be recorded as a liability on the balance sheet and disclosed in a note to the financial statements. The likelihood of a loss being 80% is not a determining factor for the disclosure or recording of a contingent liability.

A Contingent Liability Should Be Disclosed in a Note to the Financial