Contingent Liability Disclosure in the Footnotes of the Financial Statements

question 105

Multiple Choice

Contingent liability disclosure in the footnotes of the financial statements would normally be made when

• A) the outcome of the accounting event is deemed probable, but a reasonable estimation as to the amount cannot be made by the client or auditor.
• B) a reasonable estimation of the loss can be made, but the outcome is not probable.
• C) the outcome of the accounting event is deemed probable, and a reasonable estimation as to the amount can be made.
• D) the outcome of the accounting event as well as a reasonable estimation of the loss cannot be made.

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Definitions:

Hold Back

The act of withholding part of a payment or benefit until certain conditions are met or to exert control or influence over a situation.

Bona Fide Purchaser

A person who buys something in good faith without notice of any previous claim or lien against the property.

Good Title

A rightful or legitimate claim to the ownership of property or legal recognition of the ownership of property.