When a company encounters a contingent liability that is remote in likelihood, the company should:
A) include a description in the footnotes to the financial statements.
B) record the amount of the liability times the probability of its occurrence.
C) record the amount of the liability as a long-term liability on the balance sheet.
D) omit the information about the contingent liability from its financial statements and footnotes.

Question

Quizplus · Accepted Answer

When a contingent liability is remote in likelihood, it is not required to be disclosed in the financial statements or footnotes according to accounting standards.

When a Company Encounters a Contingent Liability That Is Remote