Question

ASPE - When do we record a contingent liab?

A.When it is remote.
B.When the outcome is probable and the amount can be reliably estimated.
C.Only if it impacts shareholders' equity.
D.When legally required.

Answer 1

Under ASPE, a contingent liability is recorded when it is probable that a liability has been incurred and the amount can be reliably estimated.

Step-by-step explanation:

Under Accounting Standards for Private Enterprises (ASPE), a contingent liability is recorded when two conditions are met: (1) it is probable that a liability has been incurred, and (2) the amount of the liability can be reliably estimated. This approach emphasizes the need for a probable outcome and a reliable measurement before recognizing a contingent liability on the financial statements.

If the potential liability is considered remote, it does not require recording in the financial statements. Similarly, contingent liabilities that affect shareholders' equity or require legal disclosure would still need to meet the criteria of probability and measurability to be recorded. Hence, the correct answer to when a contingent liability is recorded under ASPE is B. When the outcome is probable and the amount can be reliably estimated.