Quick Finance Tip - Before Year End We Find Out Possible Contingent Loss Example

Sometimes we need to decide whether a loss should be accrued in financial statements in conjunction with a disclosure note, if a loss just requires a disclosure note, or if no disclosure is necessary to begin with. Let us assume the following. We have a claim or assessment  and find it to be probable, we need to evaluate the likelihood of an unfavorable outcome (and if we can estimate and report a loss). And we come to the conclusion that we have  a "reasonable understanding, therefore, an estimated loss and contingent liability cannot be accrued since an unfavorable outcome is only reasonably possible (regardless if we know the loss amount).