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  • Do you accrue for liquidating damages on the balance sheet?

    Depending on the terms of the contract, a company may have to pay liquidating damages to the other party if the contract is breeched. Liquidating damages are an example of a potential loss contingency, and the company should only accrue the liquidating damages on the balance if it is probable to occur and can be […]

  • What is a loss contingency, and do they need to be recorded on the balance sheet and/or in the notes to the financial statements?

    A loss contingency exists when the company thinks there is a chance they might have a cash outflow for an event in the future, but currently, there is no definite answer. For loss contingencies, it depends on the assessment or likelihood of incurring the loss. Focus on the language, and that will help you determine […]

  • When recording a loss contingency on the balance sheet, and I have a range of possible outcomes, what estimate should I go with?

    As long as the loss contingency is probable, and the loss can be reasonably estimated, you should always go with the lowest number on the range.