Accounting for Contingencies

Accounting for Contingencies: Disclosure of Future Business Risks

falseSchiff, Jonathan

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; Schiff, Allen

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; Rozen, Hannah.Management Accounting Quarterly13. 3 (Spring 2012): 1-8.

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The increase in recession-induced merger and acquisition activity, the enhancement of executive exposure as a result of the Sarbanes-Oxley Act (SOX), and the business leadership focus on global risk management all point to the need for a renewed focus on accounting for contingencies. Also, related disclosures can shed valuable light on the potential of corporations to meet future reported earnings and cash flow goals. Accounting Standards Codification® (ASC) 450, "Contingencies" (formerly Statement of Financial Accounting Standards No. 5 (SFAS No. 5), "Accounting for Contingencies"), applies to both gain and loss contingencies. With the exception of tax loss carryforwards, gain contingencies are not generally recognized because they could result in recognition of revenue before it is realized. In contrast, many types of loss contingencies are recognized. Principally, these include loss contingencies that result in liabilities, as well as those that involve asset impairments

The increase in recession-induced merger and acquisition activity, the enhancement of executive exposure as a result of the Sarbanes-Oxley Act (SOX), and the business leadership focus on global risk management all point to the need for a renewed focus on accounting for contingencies. Also, related disclosures can shed valuable light on the potential of corporations to meet future reported earnings and cash flow...