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ASC 450 — Contingencies

ASC 450, Contingencies, outlines the accounting and disclosure requirements for loss and gain contingencies. An estimated loss from a loss contingency is recognized only if the available information indicates that (1) it is probable that an asset has been impaired or a liability has been incurred at the reporting date and (2) the amount of the loss can be reasonably estimated. Loss contingencies that do not meet both criteria for recognition still may need to be disclosed in the financial statements. Gain contingencies usually are not be reflected in the financial statements because to do so might be to recognize revenue before its realization. The Codification also provides certain industry-specific contingency guidance, but such guidance is included in the industry sections of the Codification.

 

Related resources

See our comprehensive collection of news and publications related to contingencies.

 

International guidance

For the IASB's guidance on this topic, see IAS 37, Provisions, Contingent Liabilities and Contingent Assets.

 

Overview

The full text of ASC 450 can be found in the FASB Accounting Standards Codification (link to the FASB's Web site; registration required). Also, the full text of the Codification and Deloitte-authored Q&As related to the Codification are available in the Deloitte Accounting Research Tool (DART)  Web site (subscription required).

ASC 450 comprises three Subtopics (Overall, Loss Contingencies, and Gain Contingencies). Below is an overview of each Subtopic.

 

450-10 Overall

ASC 450-10 notes that it "establishes the scope and scope exceptions for the Contingencies Topic, provides definitions, and includes links to the standards that appear in Subtopics 450-20 and 450-30."

 

450-20 Loss Contingencies

ASC 450-20 notes the following:

 

The following are examples of loss contingencies that are discussed in this Subtopic:

  1. Injury or damage caused by products sold
  2. Risk of loss or damage of property by fire, explosion, or other hazards
  3. Actual or possible claims and assessments
  4. Threat of expropriation of assets
  5. Pending or threatened litigation.

450-30 Gain Contingencies

ASC 450-30 notes that it "provides guidance for the recognition and disclosure of a gain contingency," but notes that contingencies that result in a gain should generally not be included in the financial statements because doing so would recognize revenue before it is realized.

Content from the FASB Accounting Standards Codification® included at http://www.usgaapplus.com is copyrighted by the Financial Accounting Foundation, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116, and is reproduced with permission.

FASB Accounting Standards Updates

    The following ASUs amended the guidance in this Topic:

    Proposed FASB Accounting Standards Updates

      No current proposed ASUs on Topic 450.

      Correction list for hyphenation

      These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.