Chapter 13 Flashcards
____________ is defined as “an existing condition, situation, or set of circumstances involving uncertainty as to a possible gain or loss to an entity that will ultimately be resolved when one or more future events occur or fail to occur”
contengencies
_______ is the nondiscounted amount of cash, or its equivalent, into which an asset is expected to be converts in due course of business
Net realizable value (NRV)
________ is the nondiscounted amount of cash, or its equivalent, expected to be paid to liquidate an obligation in the due course of business; these are related to liabilities
Net settlement value (NSV)
What are the two factors that affect whether or not a loss contingency must be accrued and reported as a liability?
- The likelihood that the confirming event will occur
2. Whether the loss amount can be reasonably estimated
Likelihood of occurrence:
_________ a confirming event is likely to occur
probable
Likelihood of occurrence:
__________ the chance the confirming event will occur is more than remote, but less than likely
reasonably possible
Likelihood of occurrence:
___________ the chance the confirming event will occur is slight
remote
Loss contingency recognition criteria:
Click to see
A loss contingency is accrued only if a loss is probable AND the amount can be reasonably estimated
FASB ASC 450-20-25-2
Accrued = ?
recognized
As a general rule, we NEVER record GAIN contingencies. Why?
Because of conservatism; We don’t want to overstate
What is the FASB ASC definition and call number for a contingency?
_____ defined as “an existing condition, situation, or set of circumstances involving uncertainty as to a possible gain or loss to an entity that will ultimately be resolved when one or more future events occur or fail to occur”
450-20-20
Are all contingencies required or allowed to be recognized?
No!
