Question

To recognize a loss contingency, the loss must be:

a. Remote, and disclosure is not possible.
b. Both likely and measurable.
c. Both more likely than not and expected to be resolved in the near term.
d. Considered possible, and the amount is certain.

Answer 1

A loss contingency must be both likely and measurable.

Step-by-step explanation:

In order to recognize a loss contingency, the loss must be both likely and measurable.

This means that it is probable that the loss will occur and that the amount of the loss can be estimated with a reasonable degree of certainty.

For example, if a company is involved in a lawsuit and it is likely that they will lose the case and have to pay damages, the loss contingency should be recognized in their financial statements.