How Is a Contingent Liability Reported If It Is Considered

question 11

Multiple Choice

How is a contingent liability reported if it is considered "reasonably possible?"

• A) The liability may or may not be recorded in the footnotes to financial statements.
• B) The contingent liability should be disclosed in the footnotes to the financial statements.
• C) The liability should be disclosed in the footnotes as well as on the face of the financial statements.
• D) No mention of the liability needs to be made in the financial statements.

---

Definitions:

Vulnerability

The quality or state of being exposed to the possibility of being attacked or harmed, either physically or emotionally.

Vascular Headaches

A category of headaches believed to be related to the dilation or constriction of blood vessels in the head, such as migraines.

Tension Headaches

Pain produced by sustained muscle contractions in the neck, shoulders, scalp, and face, as well as by activity in the central nervous system.

Stress

A state of mental or emotional strain or tension resulting from adverse or demanding circumstances.