📏CPA EXAM PREP

Contingencies and Commitments

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Question

What role does legal counsel play in litigation contingency accounting?

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Answer

Counsel helps assess outcome likelihood and estimate the loss.

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Question

Why can a guarantee require a liability even when default is remote?

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Answer

ASC 460 measures the stand-ready obligation at fair value.

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Question

What additional disclosure is required for many guarantees under ASC 460?

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Answer

Nature, maximum potential payment, and recourse.

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Question

When are environmental remediation liabilities accrued?

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Answer

When probable and reasonably estimable.

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