Question

There is a possibility of a safety hazard for a manufactured product. As yet, no claim has been made for damages, though there is a reasonable possibility that a claim will be made. If a claim is made, it is probable that damages will be paid and the amount of the loss can be reasonably estimated. This possible loss must be:

	Accrued	Disclosed
a.	Yes	Yes
b.	Yes	No
c.	No	Yes
d.	No	No

Answer 1

A Contingent Liability is to be accrued when the chances of occurrence are probable and amount can be reasonably estimated.

In the given case, it is not probable that a claim will be asserted so the loss should neither be accrued nor disclosed.

Option D Accrued-No ; Disclosed- No is correct