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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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What is a loss contingency? What criteria have to be met for a company to accrue a loss contingency? If these criteria are not met, how does a company disclose a loss contingency?

To determine

State the meaning of loss contingency and the criteria that has to be met by a company to accrue loss contingency and if these criteria are not met, explain the manner in which the company can disclose a loss contingency.

Explanation

Loss contingencies:

Loss contingencies are certain situation that makes uncertainty as to possible losses incurred by the company if some future event occurs’ and they are disclosed in an accompanying note or directly in the financial statements. Some of the examples of loss contingencies include, product warranties, guarantees of another company’s’ debt, uncollectible accounts receivables...

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