Asked by Joshua Rieser on Jun 14, 2024
Verified
Which of the following statements about contingent liabilities is incorrect?
A) A disclosure note is required when the loss is reasonably possible and the amount cannot be reasonably estimated.
B) A disclosure note is required when the loss is probable and the amount cannot be reasonably estimated.
C) A disclosure note is required when the loss is reasonably possible and the amount can be reasonably estimated.
D) A disclosure note is required when the loss is remote and the amount can be reasonably estimated.
Disclosure Note
Supplementary information provided in financial statements offering additional context or explanation about the figures presented, enhancing transparency.
Contingent Liability
A potential financial obligation that may arise in the future depending on the outcome of a specific event.
Reasonably Possible
A term used in accounting and law to indicate that a future event or condition has a chance of occurring.
- Acquire knowledge regarding the benchmarks for acknowledging, evaluating, and revealing contingent liabilities in fiscal documentation.
Verified Answer
SW
Shane WagnerJun 14, 2024
Final Answer :
D
Explanation :
This statement is incorrect because a disclosure note is not required when the loss is remote, regardless of whether or not the amount can be reasonably estimated. Contingent liabilities are disclosed in the footnotes of a financial statement when they are probable, reasonably possible, or when the amount can be reasonably estimated. If the loss is remote, then no disclosure is required.
Learning Objectives
- Acquire knowledge regarding the benchmarks for acknowledging, evaluating, and revealing contingent liabilities in fiscal documentation.