CFA Practice Question
A loss contingency should be accrued on a company's records only if it is
A. reasonably possible that a liability has been incurred and the amount of the loss is known.
B. remotely probable that a liability has been incurred but the amount of the loss can be reasonably estimated.
C. probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
Explanation: Loss contingencies should be accrued when information available prior to the issuance of financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred, and the amount of the loss can be reasonably estimated.
User Contributed Comments 2
| User | Comment |
|---|---|
| solonzo | see conceptual framework defination of liability,and provisions |
| soukhov | future loss cannot be known, it can be only estimated |