Which of the following accurately describes how contingent liabilities are reported on the Balance Sheet?
A)Contingent liabilities are not reported.
B)Contingent liabilities are disclosed in the footnotes only.
C)Contingent liabilities are reported in the liabilities section.
D)The accounting treatment for contingent liability could be A, B, or C depending on the likelihood of an actual obligation occurring.

Question

Quizplus · Accepted Answer

The accounting treatment for contingent liabilities could be A (not reported), B (disclosed in footnotes only), or C (reported in liabilities section) depending on the likelihood of an actual obligation occurring. If it is probable that the obligation will become actual and the amount can be reasonably estimated, the liability will be recognized on the balance sheet. If the likelihood is uncertain or remote, the contingency will only be disclosed in footnotes. If the likelihood is reasonably possible but not probable, it may or may not be recognized on the balance sheet depending on the specific circumstances.

Which of the Following Accurately Describes How Contingent Liabilities Are