A Contingent Liability Need Only Be Disclosed in the Financial

question 76

Multiple Choice

A contingent liability need only be disclosed in the financial statement notes when the likelihood of the contingency is

• A) reasonably possible.
• B) probable.
• C) remote.
• D) unlikely.

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Definitions:

Held-to-maturity Securities

Debt securities that an investor intends to hold until a fixed maturity date.

Debt Securities

Financial instruments that represent a loan made by an investor to a borrower, typically including terms for interest payments and the return of principal at maturity.

Fixed Maturity

A term related to fixed-income investments indicating the set date when the principal amount of the investment is paid back to the investor.

Equity Securities

Financial instruments representing ownership interest in a company, such as stocks, which provide shareholders with claims on assets and earnings.