Question

Bell International estimates that a $10 million loss will occur if a foreign government expropriates some company property. Expropriation is considered reasonably possible. How should Bell report the loss contingency? (You may select more than one answer.

Answer 1

The contingency is not accrued.

This is a loss contingency.

The contingency can be reasonably estimated.

A disclosure note should describe the contingency.

Step-by-step explanation:

Since this is a loss due to expropriation, it is an example of loss contingency. Since we are given a concrete number (estimation of loss), this is a contingency that can be logically estimated. Since it is likely that the loss will really occur, it is important to attach a disclosure note to thoroughly describe the actual contingency (giving it a basis).