Purchase Solution

Requirements for Accrual Loss Contingency

Not what you're looking for?

Ask Custom Question

The two basic requirements for the accrual of a loss contingency are supported by several basic concepts of accounting. If you should examine how the two basic requirements for accrual of a loss contingency relate to the following concepts:
1. Periodicity (time period)
2. Measurement
3. Objectivity
4. Relevance

Please do the following:
1. Provide points of examination on how the two basic requirements for accrual of a loss contingency relate to the concept of periodicity.

2. Provide the points of examination on how the two basic requirements for accrual of a loss contingency relate to the concept of measurement.

3. Provide the points of examination on how the two basic requirements for accrual of a loss contingency relate to the concept of objectivity.

4. Provide the points of examination on how the two basic requirements for accrual of a loss contingency relate to the concept of relevance.

Purchase this Solution

Solution Summary

This response looks at the requirements for accrual of a loss contingency and how this relates to periodicity, measurement, objectivity, and relevance.

Solution Preview

Dear Student,

Thank you for selecting BrainMass to assist you. Please be advised that the text of this work may be copy-protected, but may be used as a good comprehensive sample or guide to aid you. Multiple links have been provided to assist you. Please be sure to cite the references listed herein.

Note [As stated on Brainmass.com]: "We cannot do assignments for students. If it appears that this is what is requested, Postings may be Suspended.

Firstly, According to Financial Accounting Standards Board (FASB) Statement No. 5, "Accounting for Contingencies" (FAS 5), is still considered to be one of the most significant of all accounting standards; it provides the fundamental guidance for recognition of estimated losses from virtually all loss contingencies."

Secondly, the key concept of the statement is that: An estimated loss from a loss contingency . . . shall be accrued by a charge to income if both of the following conditions are met:
(a) Information prior to the issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements...and it is probable that one or more future events will occur ...

Purchase this Solution


Free BrainMass Quizzes
Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Basics of corporate finance

These questions will test you on your knowledge of finance.

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.