Question

If probability of an inflow or outflow is low, what information will be relevant to disclose in the notes?

a) Disclosure notes are not necessary.
b) No information is relevant when probability is low.
c) Nature of the uncertainty and possible outcomes.
d) Only the measurement method.

Answer 1

The relevant information to disclose when the probability of an inflow or outflow is low includes the nature of the uncertainty and possible outcomes.

Step-by-step explanation:

When the probability of an inflow or outflow is low, it's important to provide disclosure in the notes accompanying financial statements.

The relevant information to disclose includes the nature of the uncertainty and the possible outcomes related to the inflow or outflow. This disclosure ensures users of the financial statements are fully informed about the potential impacts of these uncertain events, even though the likelihood of occurrence is low.

Therefore, the correct answer is c) Nature of the uncertainty and possible outcomes.

According to accounting standards, it's not sufficient to ignore uncertainties simply because they are deemed improbable. Stakeholders require a comprehensive understanding of all potential risks and benefits that could affect the entity's financial position.

Thus, details about these low-probability events should be accurately described in terms of their nature, potential timing, and impact.