Contingencies And Commitments

Question 1

Contingent Liabilities

Answer 1

Potential liabilities that a company is aware of, there are different requirements depending on how probable they are

Question 2

If a contingent liability is probable and can be estimated

Answer 2

Should be recognized on the financial statements.

The best estimate in a range is what should be accrued, if no estimate is better than any other, then the minimum should be accrued.

Question 3

If the contingent liability is probable but cannot be estimated or reasonably possible

Answer 3

Description of the contingency and a range of possible loss must be disclosed.

Question 4

If the contingent liability is remote

Answer 4

Then it doesn’t need to be disclosed

Question 5

Gain Contingencies

Answer 5

Never recognized until realized (the gain has actually been received), they will be mentioned only in a footnote.

Question 6

IFRS Differences

Answer 6

Under GAAP, if a contingent liability is going to be recognized, you use the lowest amount in the range of possibilities. Under IFRS, you use the midpoint in the range of possible liability.