In accounting for a contingent liability, if the likelihood of the obligation is probable and the amount can be estimated, a company must
A) report the liability on the balance sheet.
B) provide disclosure in the footnotes to the financial statements.
C) not recognize the liability until it is certain and the exact amount is known.
D) do nothing.

Question

Quizplus · Accepted Answer

If the likelihood of the obligation is probable and the amount can be estimated, a company must recognize the liability on the balance sheet in accordance with accounting principles, such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS).

In Accounting for a Contingent Liability, If the Likelihood of the Obligation