Contingences

Question 1

Accrued liability for probable loss

Answer 1

When an outcome for a dispute or lawsuit is probable, you need to accrue a liability and disclose it in the F/S. If a range is given, use the lowest number.

Question 2

Accrued liability for estimate (gain)

Answer 2

Gain contingences should be disclosed in the notes unless the likelihood of the gain being realized is remote. The full possible settlements should be disclosed

Question 3

Contingent liabilities that are remote

What is the exception?

Answer 3

Neither accrued nor disclosed.

Exception: However, related party

Transactions such are the ones described must be disclosed.

Question 4

Discounted liability (note receivable)

Answer 4

The contingent liability for a discounted note receivable is the maturity value.

This should be disclosed.

Question 5

Contingent liabilities, losses probable with range and likely amount

Answer 5

When a range is given for the loss but a most likely amount is given, use the most likely amount.

Question 6

When a loss is probable and can be reasonably estimated, how are the liability and expenses affected?

Answer 6

Expenses and liabilities would both increase.

Question 7

Subsequent events

Answer 7

An event or transaction that occurs after the balance sheet date but before the financial statements are issued or available to be issued.

Record J/E and disclosure.

Question 8

Record J/E and disclosure.

Question 9

Subsequent events

Answer 9

Subsequent events that provide information after the balance sheet date and did not exist at the balance sheet date are non-recognized subsequent events.

No J/E but disclosed in the notes.