If a loss is reasonably possible to occur, should it be accrued?
No. If the loss contingency can is only reasonably possible to occur, no accrual is necessary. The only requirement is to disclose the loss contingency in the notes to the financial statements. If the potential loss can be reasonably estimated, then include the potential loss (on the low side) in the disclosure.
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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...
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If a loss is probable and can be reasonably estimated, should I accrue for it?
Yes, the loss contingency should be accrued for on the balance sheet and disclosed in the notes to the financial statements.
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...
If a loss is probable and can be reasonably estimated, should I accrue for it?
Yes, the loss contingency should be accrued for on the balance sheet and disclosed in the notes to the financial statements.
