FAR 5 - M2 CONTINGENCIES AMD COMMITMENTS

Question 1

Contingent liab is probable and can be estimated

Answer 1

report in FS using lower range of estimate

Question 2

Contingent liab is probable but cannot be estimated

Answer 2

Disclosure only

Question 3

Contingent liab is remote

Answer 3

No disclosure is needed

Question 4

Gain contingencies

Answer 4

not reported in FS until actually realized
but can be mentioned in footnotes

GAAP principle: Conservatism
anticipate all losses but not gain