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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 whether you should record it on the balance sheet and/or disclose in the notes to the financial statements.

Some common examples of loss contingencies include:

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