ACC E272 Lecture Notes - Lecture 17: Microsoft Powerpoint, Market Rate, Relative Risk
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An existing condition, situation or set of circumstances involving uncertainty as to possible gain or loss to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur. We disclose gain contingencies if probability of receipt is high. Fasb uses 3 areas of probability: probable, reasonably possible, and remote. Gaap says that if the item is probable and can be estimated, record. If it is reasonably possible or probable but can"t be estimated, disclose. Common loss contingencies include litigation, claims, assessments, guarantee and warranty costs, premiums and coupons, and environmental liabilities. In practice, current liabilities are usually recorded and reported in financial statements at their full maturity value. Acid-test ratio= (cash+ short term investments + accounts receivable net) / Long term debt consists of probable future sacrifices of economic benefits arising from present obligations that are not payable within a year or the operating cycle of the company whichever is longer: ex.
