How should a contingent liability that is reasonably possible but cannot reasonably be estimated be reported within the financial statements?

A) It must be recorded and reported as a liability.
B) It does not need to be recorded as a liability nor disclosed in a note.
C) It must only be disclosed as a note to the financial statements.
D) It must be reported as a liability,but not disclosed in a note.

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Brooklyn Kujawa · Accepted Answer

Final Answer : C, Explanation :  A contingent liability that is reasonably possible but cannot reasonably be estimated must be disclosed in a note to the financial statements. It does not need to be recorded as a liability on the balance sheet because the amount cannot be reasonably estimated. However, the note should describe the nature of the contingency and indicate the range of possible outcomes.

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