59.7k views
0 votes
An event is reasonably possible but the related liability is not estimable. It will a. be disclosed only b. be recorded only c. not be recorded or disclosed d. be recorded and disclosed

User Egeland
by
7.5k points

1 Answer

1 vote

Final answer:

An event that is reasonably possible but has an unestimable related liability will only be disclosed in the financial statements and not recorded. (option a) This ensures transparency while recognizing uncertainty.

Step-by-step explanation:

When an event is reasonably possible but the related liability is not estimable, it will be disclosed only. This means that while there is a potential for liability, the company cannot determine a fair estimate of the potential financial impact. Therefore, the company should disclose the nature of the contingency and the uncertainties that could affect the future outcome in the notes to the financial statements, as required by accounting standards. However, it does not record the liability on the balance sheet because it cannot be reliably quantified. This approach ensures transparency for financial statement users while acknowledging that some future events are uncertain.

User Bodie
by
7.8k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories