Reporting Contingencies in CFA Level 1 Exam Preparation | Test Prep

Understanding Reporting Contingencies - CFA Level 1 Exam | Test Prep

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Question

When reporting contingencies -

Answers

A. disclosure of a loss contingency is to be made if there is a remote possibility that the loss has been incurred.

B. guarantees of others' indebtedness are reported as a loss contingency only if the loss is considered imminent or highly probable.

C. disclosure of a loss contingency must include a dollar estimate of the loss.

D. none of these answers.

E. a loss that is probable but not estimable must be disclosed with a notation that the amount of the loss cannot be estimated. E

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Explanations

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A. B. C. D. E.

Explanation

Contingent losses should be accrued if both probable and reasonably estimable. In this case, the contingent loss is not estimable and, therefore should only be disclosed in the notes since it is probable.

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