When are contingent liabilities required to be recorded?

Question

Quizplus · Accepted Answer

According to generally accepted accounting principles (GAAP), contingent liabilities should be recorded when they are both probable (meaning there is a greater than 50% chance the liability will occur) and reasonably estimable (meaning the amount of the liability can be determined with a reasonable degree of accuracy). Waiting until the liability becomes legally enforceable or only one of the two criteria being met is not sufficient for recording the liability on the financial statements.

When Are Contingent Liabilities Required to Be Recorded