Loss contingency
–> a loss will incur if certain future events occur or not occur
Recognition of a loss contingency
1. Recognized in the financial statements
2. Disclosed in the notes
2. Disclosed in the notes
Recognized in the financial statements
–> if both (A) and (B) are satisfied
(A) it is “probable” that a loss will incur
(B) amount of loss can be reasonably estimated
(A) it is “probable” that a loss will incur
(B) amount of loss can be reasonably estimated
Disclosed in the notes, without recognition
–> if it is “reasonably possible” that a loss will incur
Disclosure is not required
–> if the possibility of loss is “remote”