What is Gain contingency?
In short
A gain contingency is a possible gain that depends on a future event, such as a pending lawsuit in which the company is the plaintiff. It isn't recognized until it is realized or realizable.
Key takeaways
- It may be disclosed, but without misleading statements about how likely it is.
- Compare loss contingencies, which are accrued when probable and reasonably estimable.
- A gain from a settled lawsuit after the balance sheet date isn't recognized in the earlier period.
Where it's tested
FAR: Current Liabilities, Contingencies & Commitments — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A company is virtually certain to win a lawsuit and receive $1,000,000, though judgment has not yet been entered. How should this be reported?