Wiley GAAP 2014: Interpretation and Application of Generally Accepted Accounting Principles

31   ASC 450 CONTINGENCIES

Perspective and Issues

Subtopics

Scope and Scope Exceptions

Overview

Definitions of Terms

Concepts, Rules, and Examples

ASC 450-10, Overall

ASC 450-20, Loss Contingencies

Levels of probability

Estimating the loss

Events subsequent to balance sheet date

Unasserted claims or assessments

Estimate versus contingency

Litigation

ASC 450-30, Gain Contingencies

Other Sources

PERSPECTIVE AND ISSUES

Subtopics

ASC 450, Contingencies, contains guidance for reporting and disclosure of gain and loss contingencies and has three subtopics:

• ASC 450-10, Overall, which, along with ASC 450-20450-30, provides guidance on accounting and disclosures for contingencies
• ASC 450-20, Loss Contingencies, which describes accounting for potential liabilities in circumstances involving uncertainties.
• ASC 450-30, Gain Contingencies, which describes accounting and disclosure requirements for gain contingencies.

Scope and Scope Exceptions

ASC 450 applies to all entities. Not all uncertainties are contingencies. ASC 450-10-55 points out several common estimates that do not fall under the contingency guidance:

• Depreciation
• Estimates used in accruals
• Changes in tax law.

ASC 450-10-15-2A has the following transaction exception:

“The guidance in the Contingencies Topic does not apply to the recognition and initial measurement of assets or liabilities arising from contingencies that are measured at fair value or assets arising from contingencies measured at an amount other than fair value ...