ACCA FA · Chapter 8 · Question 3 of 10
A company is suing a supplier for damages. Its lawyers believe it is probable, but not virtually certain, that the company will win and receive $50,000. How should this be treated?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Disclose a contingent asset in the notes
Explanation
Contingent assets are never recognised unless the inflow is virtually certain, in which case the asset is no longer contingent. Where an inflow is probable, the contingent asset is disclosed in the notes. If an inflow were merely possible, no disclosure would be made.
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