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What conditions must be met before a contingency can be charged against income?

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  • Post Date 2018-11-08T09:07:58+00:00
  • Post Category New Samples

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What conditions must be met before a contingency can be charged against income?

Contingencies in financial statements

INSTRUCTIONS:

1. Discuss contingencies and how they are reported on financial statements. What conditions must be met before a contingency can be charged against income? 2. When is it better for a business to have Long Term Debt versus when is it better to have Capital? 3. For each of the intended uses of the derivatives listed below, explain the accounting in fair value: Derivative designated as a hedge of the exposure to changes in the fair value of a recognized asset or liability to or firm commitment Derivative designated as a hedge of the exposure to variable cash flows of a forecasted transaction Derivative designated as a hedge of the foreign currency exposure of a net investment in a foreign operation Derivative not designated as a hedge

CONTENT:
Discussion QuestionsStudent:Professor:Course title:Date:Discussion QuestionsThose events that might or might not take place in the future are understood as contingencies. A contingent loss is a possible reduction in the fiscal holdings of the business, whereas a contingency gain is a possible increase to the fiscal holdings of the business. Contingencies are reported on financial statements as liabilities if it is probable that they would incur a loss and their sums can be realistically estimated. Gain contingencies are usually reported on the income statement as soon as they are earned or realized. A loss contingency will not be reported in the event that it cannot be recognized because of improbability or/and the sum of the loss cannot be dependably estimated or measured (Lister, 2013). A loss contingency requires the amount of the loss to be probable and that the sum of the loss should be reasonably estimable.It is better to use Long Term Debt when the businessperson wants to buy major assets ...

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