Which of the following is most likely to require only a note disclosure as a contingency?
A) Cash discounts given for early payment by customers (which are almost always taken)
B) Remote chance of loss from a lawsuit in process
C) Probable claim for an income tax refund
D) Loss from an investment in equity securities that is certain

Question

Quizplus · Accepted Answer

A note disclosure is used for contingencies that are reasonably possible, but not probable. A remote chance of loss from a lawsuit in process meets this criteria, while the other options are either almost certain to occur (cash discounts) or probable (income tax refund) and therefore require accruals or recognition in the financial statements. Loss from an investment in equity securities that is certain would also require recognition in the financial statements.

Which of the Following Is Most Likely to Require Only