If a Potential Loss on a Contingent Liability Is Probable

question 85

Multiple Choice

If a potential loss on a contingent liability is probable and amount of the loss can be reasonably estimated, the liability should be:

• A) neither reported nor disclosed in footnotes.
• B) disclosed in the auditor's report but not disclosed on the financial statements.
• C) disclosed in footnotes but not accrued.
• D) included in the financial statements as an actual liability.

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Definitions:

AIDS Epidemic

A global public health crisis caused by the spread of the Human Immunodeficiency Virus (HIV), leading to Acquired Immune Deficiency Syndrome (AIDS).

Nonnormative Events

Events that are not typical and do not follow the usual developmental life pattern.

Typical Time

Generally refers to the usual or average time taken for a specific event or activity to occur.

Atypical Time

An irregular or unusual time period or instance, often deviating from what is commonly expected or normal.