Asked by Christine Angora on Jul 01, 2024
Verified
Event is reasonably possible but amount is not estimable
A) Record only
B) Record and disclose
C) Disclose only
D) Do not record or disclose
Contingent Liability
A potential financial obligation that may arise in the future, depending on the outcome of a specific event.
Estimable
Capable of being reasonably estimated or calculated, often used in the context of accounting to refer to expenses or losses.
Reasonably Possible
A term used in accounting and law to describe an outcome that, while not certain, is more than a mere possibility and should be considered or disclosed.
- Apply the concept of contingent liabilities and how to account for and disclose them according to their likelihood and estimability.
Verified Answer
MA
Muhammad ArshanJul 02, 2024
Final Answer :
C
Explanation :
When an event is reasonably possible but the amount is not estimable, the proper treatment is to disclose the contingent liability in the notes to the financial statements without recording it in the accounts.
Learning Objectives
- Apply the concept of contingent liabilities and how to account for and disclose them according to their likelihood and estimability.