Under ASPE, a Contingent Liability Is Recognized If

question 41

Multiple Choice

Under ASPE, a contingent liability is recognized if

• A) it is certain that funds are available to settle the contingency.
• B) an asset may have been impaired.
• C) the amount of the loss can be reasonably estimated and it is likely that an asset has been impaired or a liability incurred as of the financial statement date.
• D) it is likely that an asset has been impaired or a liability incurred even though the amount of the loss cannot be reasonably estimated.

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Definitions:

Recording Revenue

The process of documenting the income a company generates from its business activities, typically recognized when goods or services are delivered.

Increase in Assets

An upward adjustment or growth in the value of resources controlled by a company that are expected to bring future economic benefits.

Decrease in Liabilities

A reduction in the total amount of obligations (debts or dues) that a company owes to creditors or third parties.

Stockholders' Equity

The stake of shareholders in a corporation, determined by subtracting liabilities from the total assets' value.