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GAAP gain and loss contingencies

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Generally accepted accounting principles (GAAP) require loss contingencies to be accrued in the period the contingency becomes known. However, GAAP specifically disallows booking gain contingencies until the gain is realized. Do you agree or disagree? Why?

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Solution Summary

In a 209 word cited solution, the reponse explains the theory behind the different treatment of loss contingencies as compared to gain contingencies.

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I agree with the statement and base my opinion on an understanding of the Conservatism Constraint under SFAC No. 5. Recognition and Measurement:

'Conservatism. When in doubt, an accountant should choose a solution that will be least likely to overstate assets and income. The conservatism constraint should be applied only when doubt ...

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