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:

Radula

A toothed, chitinous ribbon in the mouth of molluscs, used for scraping or cutting food before ingestion.

Molluscan

Pertaining to mollusks, a diverse group of invertebrates which includes species like snails, clams, and octopuses, characterized by a soft body and, in many cases, a calcium carbonate shell.

Conspicuous Segmentation

The clear division of a body or structure into distinct parts, commonly observed in organisms like worms and arthropods.