A contingent liability should be disclosed in a note to the financial statements rather than being recorded if:
A)The likelihood of a loss is remote.
B)The incurrence of a loss is reasonably possible.
C)The incurrence of a loss is probable.
D)The likelihood of a loss is eighty percent.

Question

Quizplus · Accepted Answer

A contingent liability should be disclosed in a note to the financial statements rather than being recorded if the incurrence of a loss is reasonably possible. If the likelihood of a loss is remote, no disclosure is required. If the incurrence of a loss is probable, the liability should be recorded in the financial statements. Eighty percent likelihood is not a specific threshold for determining whether disclosure is required or not.

A Contingent Liability Should Be Disclosed in a Note to the Financial