ACC541 Week 4 DQ Contingencies

ACC541 Week 4 DQ Contingencies - included as a part of...

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Discuss contingencies and how they are reported on financial statements. What conditions must be met before a contingency can be charged against income? A contingency is an existing condition, situation, or set of circumstances that will lead to a possible gain known as "gain contingency" or a possible loss known as "loss contingency" for an entity that eventually be resolved when the event occurs or fails to occur. Contingencies are classified as probable, reasonable, or remote for accounting purposes. SFAS No. 5, “Accounting for Contingencies” holds that gain contingencies should not be
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Unformatted text preview: included as a part of income because of the revenue recognition principle. Note disclosures are made for gain contingencies. The two conditions that must be met before a loss contingency can be charges against income are: (1) It is probable prior to the issuing financial statements that an asset will become impaired or a liability will occur at the date of financial statements. (2) The amount of the contingency can be reasonably estimated....
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