A Contingent Liability Is Recorded in the Accounting Records

question 54

Multiple Choice

A contingent liability is recorded in the accounting records

• A) if it will possibly become an actual liability, and the exact amount is unknown.
• B) if the contingency has not already been disclosed in the notes to the financial statements.
• C) under no circumstances.
• D) if a reasonable estimate of the expected loss can be determined and if it is probable.

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Definitions:

Average Returns

The arithmetic mean of the historical returns of an investment, often used as a general indication of its past performance.

Hedge Funds

are investment funds that employ a variety of strategies to earn active return, or alpha, for their investors, often involving higher risks and aiming for higher returns than traditional investments.

Survivorship Bias

The logical error of focusing on instances that survived a selection process and overlooking those that did not because of their lack of visibility.

Backfill Bias

A bias that can occur when historical performances of investment portfolios are artificially inflated because only successful funds are reported or included in analyses.