How should a contingent liability that is reasonably possible but cannot reasonably be estimated be reported within the financial statements?
A)It must be recorded and reported as a liability.
B)It does not need to be recorded as a liability nor disclosed in a note.
C)It must only be disclosed as a note to the financial statements.
D)It must be reported as a liability,but not disclosed in a note.

Question

Quizplus · Accepted Answer

A contingent liability that is reasonably possible but cannot reasonably be estimated must be disclosed in a note to the financial statements. It does not need to be recorded as a liability on the balance sheet because the amount cannot be reasonably estimated. However, the note should describe the nature of the contingency and indicate the range of possible outcomes.

How Should a Contingent Liability That Is Reasonably Possible but Cannot