Contingencies and Commitments

Free CPA FAR (Financial Accounting & Reporting) lesson in Select Transactions. 16 min read, ~2,365 words.

Loss contingency: accrue when probable AND reasonably estimable. Otherwise disclose or do nothing. Range with no best estimate: accrue the minimum, disclose the maximum exposure. Gain contingencies are never accrued. Disclose only when probable. Guarantees (ASC 460): always recognize at fair value at inception, regardless of likelihood. Firm purchase commitments...

What this lesson covers

• Content
• Example 1
• Example 2
• Common Mistakes
• Check Your Understanding
• Exam Shortcuts

Learning objectives

• III.B1

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