Question

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 can 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.

Answer 1

Answer: D - A disclosure note is required when the loss is remote and the amount can be reasonably estimated

Explanation:

A contingent liability is an obligation that might arise from an event that would occur in the future.

A contingent liability isn't disclosed when payment is remote.

A contingent liability is recorded when:

1. it is probable the event would occur.

2. there is a reasonable estimate the amount of the loss.

I hope my answer helps.