Where there is a significant uncertainty with respect to the measurement of an item,
A)do not record anything in the financial statements.
B)recognize the item in the financial statements and disclose the measurement uncertainty in the notes to the financial statements.
C)do not record anything in the financial statements but disclose the measurement uncertainty in the notes to the financial statements.
D)record the maximum amount in the financial statements.

Question

Quizplus · Accepted Answer

The best choice is to recognize the item in the financial statements and disclose the measurement uncertainty in the notes to the financial statements. This allows for transparency and full disclosure of relevant information to the users of the financial statements. It also complies with accounting standards that require disclosure of significant uncertainties. Recording the maximum amount or not recording anything in the financial statements would not provide accurate or transparent information to stakeholders.

Where There Is a Significant Uncertainty with Respect to the Measurement