Gain and Loss of Contingencies

According to FACB Accounting Standards Codification (n.d.), ASC 450 “Contingencies” covers the three topics of gain contingencies, loss contingencies, and overall. Gain contingencies are claims for the reduction in a liability or rights to receive an asset. It is noted (450-30) that the codification provides “guidance for the recognition and disclosure of a gain contingency” (FACB Accounting Standards Codification, n.d., p. 49) while stating that financial statements of a specific party should not include the contingencies that would result in again.

We will write a
custom essay
specifically for you

for only $16.05 $11/page
308 certified writers online
Learn More

By doing so, one may be at risk of recognizing the financial gain from the contingency before its actual realization. Even though gain contingency is not recorded, it is important to mention that it is taken into account in the financial statements in cases when the probability of a beneficial outcome is relatively high or when the financial gain from the contingency can be estimated to a reasonable extent.

Loss of contingency (450-20) is the increase of liability or the reduction of an asset’s value that depends on the result of an event to occur in the future. The subtopic includes some examples of loss contingencies such as the threat of assets being expropriated, the risk of property damage due to hazards, the damage of sold products, etc. Contrary to gain contingencies, loss contingencies are included in the income statement and the balance sheet when the future loss can be estimated to a reasonable extent and when the future event is highly probable. Furthermore, the value of the loss contingencies is divided into three categories: remote, probable, and reasonably probable.

References

FACB Accounting Standards Codification. (n.d.). Web.

Print Сite this

Cite this paper

Select style

Reference

StudyCorgi. (2021, March 19). Gain and Loss of Contingencies. Retrieved from https://studycorgi.com/gain-and-loss-of-contingencies/

Work Cited

"Gain and Loss of Contingencies." StudyCorgi, 19 Mar. 2021, studycorgi.com/gain-and-loss-of-contingencies/.

1. StudyCorgi. "Gain and Loss of Contingencies." March 19, 2021. https://studycorgi.com/gain-and-loss-of-contingencies/.


Bibliography


StudyCorgi. "Gain and Loss of Contingencies." March 19, 2021. https://studycorgi.com/gain-and-loss-of-contingencies/.

References

StudyCorgi. 2021. "Gain and Loss of Contingencies." March 19, 2021. https://studycorgi.com/gain-and-loss-of-contingencies/.

References

StudyCorgi. (2021) 'Gain and Loss of Contingencies'. 19 March.

Copy to clipboard

This paper was written and submitted to our database by a student to assist your with your own studies. You are free to use it to write your own assignment, however you must reference it properly.

If you are the original creator of this paper and no longer wish to have it published on StudyCorgi, request the removal.

Psst... Stuck with your
assignment? 😱
Susan
Online
Psst... Stuck with your assignment? 😱
Do you need an essay to be done?
Yes
What type of assignment 📝 do you need?
Yes
How many pages (words) do you need? Let's see if we can help you!
Yes