Contingencies
1. Gain contingency
–> a gain will incur if certain future events occur or not occur
2. Loss contingency
–> a loss will incur if certain future events occur or not occur

A loss contingency
1. if a loss is “probable” –> recognize in the financial statements
2. if a loss is “reasonably possible” –> disclose in the notes
3. if the possibility of a loss is “remote” –> disclosure is not required

A gain contingency
1. a gain contingency is not recognized in the financial statements
2. if a gain contingency is disclosed in the notes
–> should avoid misleading implications about realization

© AccountingInfo.com

Related Posts