What does probable mean in accounting?
Contingencies are reported as liabilities on the balance sheet and/or disclosed in the notes to the financial statements when it is probable they will incur a loss and when the loss can be reasonably estimated. Probable is defined as more than 50% likely to occur due to a past obligation.Click to see full answer. Then,…
Contingencies are reported as liabilities on the balance sheet and/or disclosed in the notes to the financial statements when it is probable they will incur a loss and when the loss can be reasonably estimated. Probable is defined as more than 50% likely to occur due to a past obligation.Click to see full answer. Then, what does Remote mean in accounting?Remote – is a subset of ‘possible’, at the lower end of the range of probability. It represents events that are not expected to occur, but which cannot be ruled out completely. It is intended to be a tough test because a contingent liability that is remote is not disclosed in the financial statements.Subsequently, question is, what does reasonably possible mean? “Reasonably possible” means that the chance of the event occurring is more than remote but less than likely. No treatment. Do not record or disclose a contingent liability if the probability of its occurrence is remote. Similarly one may ask, what are three categories of contingent liabilities? There are three GAAP-specified categories of contingent liabilities: probable, possible, and remote. Probable contingencies are likely to occur and can be reasonably estimated.What are contingencies in accounting?A contingency arises when there is a situation for which the outcome is uncertain, and which should be resolved in the future, possibly creating a loss. The accounting for a contingency is essentially to recognize only those losses that are probable and for which a loss amount can be reasonably estimated.
