25 2 an estimated loss from a loss contingency shall

25-2 An estimated loss from a loss contingency shall be accrued by a charge to income if both
of the following conditions are met:
a. Information available before the financial statements are issued or are available to be
issued (as discussed in Section 855-10-25) indicates that it is probable that an asset had
been impaired or a liability had been incurred at the date of the financial statements. Date
of the financial statements means the end of the most recent accounting period for which
financial statements are being presented. It is implicit in this condition that it must be
probable that one or more future events will occur confirming the fact of the loss.

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b. The amount of loss can be reasonably estimated.
The purpose of those conditions is to require accrual of losses when they are reasonably
estimable and relate to the current or a prior period. Paragraphs 450-20-55-1 through 55-17
and Examples 1–2 (see paragraphs 450-20-55-18 through 55-35) illustrate the application of
the conditions. As discussed in paragraph 450-20-50-5, disclosure is preferable to accrual
when a reasonable estimate of loss cannot be made. Further, even losses that are reasonably
estimable shall not be accrued if it is not probable that an asset has been impaired or a
liability has been incurred at the date of an entity's financial statements because those losses
relate to a future period rather than the current or a prior period. Attribution of a loss to events
or activities of the current or prior periods is an element of asset impairment or liability
incurrence.
> Assessing Probability of Incurrence of a Loss
25-3 The conditions in the preceding paragraph are not intended to be so rigid that they require
virtual certainty before a loss is accrued. Instead, the condition in (a) in the preceding paragraph
is intended to proscribe accrual of losses that relate to future periods.
> Assessing Whether a Loss Is Reasonably Estimable
25-4 The condition in paragraph 450-20-25-2(b) is intended to prevent accrual in the financial
statements of amounts so uncertain as to impair the integrity of those statements.
25-5 That requirement shall not delay accrual of a loss until only a single amount can be
reasonably estimated. To the contrary, when the condition in paragraph 450-20-25-2(a) is met and
information available indicates that the estimated amount of loss is within a range of amounts, it
follows that some amount of loss has occurred and can be reasonably estimated. Thus, when the
condition in paragraph 450-20-25-2(a) is met with respect to a particular loss contingency and the
reasonable estimate of the loss is a range, the condition in paragraph 450-20-25-2(b) is met and
an amount shall be accrued for the loss.
The issue of subsequent events is discussed in 450-20-30
450-20-30 Initial Measurement
General
30-1 If some amount within a range of loss appears at the time to be a better estimate than any
other amount within the range, that amount shall be accrued. When no amount within the range is