Contingency & Commitments Flashcards
what are the accounting for loss and gain contingencies?
Per accepted accounting conservatism rule, loss contingencies are recorded in the FS if the contingencies are probable and the amounts (minimum of given a range) are reasonably estimated, while gain contingencies are disclosed in FS footnotes and recognized it when realized only.
what is the contingent liability of a discounted note receivable?
It is the maturity value of the note.
Do we accrued contingent liability if the event is “reasonably possible”?
No. Disclosure in footnotes only. If the event is “probable”, accrued and disclose contingent liability. “Remotely possible” is neither accrued or disclosed
what is warranty expense is calculated?
It is calculated as a percentage of sales. Any change in the estimate of the percentage is recorded prospectively from current year moving forward
