What does loss contingency mean on the CPA exam?
Loss contingency. An existing condition involving uncertainty that may produce a loss, resolved by a future event. Accrued only when the loss is probable and reasonably estimable; reasonably possible means disclose only. Remote usually means neither, though ASC 460 still requires certain guarantees to be disclosed.
Defined against ASC 450-20-20, 25-2, 50-3.
Which CPA exam sections use loss contingency?
Loss contingency appears in the FAR section of the CPA exam.
Related terms
- Type 2 subsequent event: A nonrecognized subsequent event: the condition came into existence after the balance sheet date, so it is disclosed and never adjusted.
- fair market value: The price at which property would change hands between a willing buyer and a willing seller, neither under compulsion and both reasonably informed.
- Type 1 subsequent event: A recognized subsequent event: it gives evidence about a condition that already existed at the balance sheet date, so the statements are adjusted.
- lease term: The non-cancellable period, plus any option period the lessee is reasonably certain to take, plus any period controlled by the lessor.
- subsequent event: Something that happens between the balance sheet date and the date the statements are issued.
- net realizable value: Estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation.