A disclosure of a contingent liability in the footnotes is made rather than adjusting the financial statement accounts when
A) The outcome of the event is judged to be reasonably possible and the loss can be reasonably estimated.
B) The loss can be reasonably estimated, but the outcome is unknown.
C) The outcome of the event is judged to be reasonably possible but the loss cannot be reasonably estimated.
D) The outcome is unknown and the loss is reasonably estimable but the entity does not want to book the loss.

Question

Quizplus · Accepted Answer

A contingent liability should be disclosed in the footnotes if the outcome of the event is judged to be reasonably possible but the loss cannot be reasonably estimated. If the loss can be reasonably estimated and the outcome is either probable or likely, the liability should be recorded and reflected in the financial statement accounts. If the outcome is unknown but the loss can be reasonably estimated, the liability should also be recorded in the financial statement accounts. If the entity does not want to book the loss, it cannot withhold the disclosure of the contingent liability.

A Disclosure of a Contingent Liability in the Footnotes Is