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U.S. GAAP
Financial Accounting Review

Section 5210: Contingencies

[U.S. GAAP Codification Topic]
450 Contingencies
450-10 Overall
450-20 Loss contingencies
450-30 Gain contingencies

[U.S. GAAP before the Codification]
SFAS 5, March 1975, Accounting for Contingencies

1. Contingencies
(1) Gain contingency
--> a gain will incur if certain future events occur or not occur
(2) Loss contingency
--> a loss will incur if certain future events occur or not occur

2. Loss contingency
(1) if a loss is "probable" --> recognize in the financial statements
(2) if a loss is "reasonably possible" --> disclose in the notes
(3) if the possibility of a loss is "remote" --> disclosure is not required

3. Gain contingency
(1) a gain contingency is not recognized in the financial statements
(2) if a gain contingency is disclosed in the notes
--> should avoid misleading implications about realization