F4 - M2 Contingencies (Subsequent Events)

Question 1

What type of accrual or disclosure needed is needed for “reasonably” outcome.

Answer 1

No amounts should be accrued if it is reasonable but disclosed

Question 1

What do you accrue if there is a “best estimate”

Answer 1

Accrued for the range

Question 2

What type of accrual or disclosure needed is needed for “probable” outcome.

Answer 2

Accrue w/ Disclosure

Question 3

Event of lawsuit takes place in Y1 but actual litigation takes place in Y2.

Answer 3

Even if even of lawsuit takens happens in year 1 but the lawsuit happens in year 2. The subsequent event belongs in year 1.

Question 4

Gain disclosures that are probable

Answer 4

If gain is probable and range is given “use the range”, even if an amount was paid out In year 2 the actual amount was unknown at year end. Therefore in year 1 the range is used. There is no accrual for gain.

Question 5

Legal counsel gives most likely amount

Answer 5

If most likely amount is given accrue for that