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 or reported as a liability.
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 meet the recognition criteria to be recorded as a liability on the balance sheet. However, the nature of the contingency, the possible range of outcomes, and any potential impact on the company must be disclosed in the notes.

How Should a Contingent Liability That Is Reasonably Possible but Cannot