Do you think contingent gains should be disclosed in the financial statements? Defend your position.
Solution
Contingent gain or loss is a concept where the firm will suffer loss or will make gain only on hapening of certain contingency or event in future. Suppose a company has claimed some money for extra work. Disput arises regarding the inclution of those work in the contract escalation clause. The dispute has been referred to court. The company will gain, if the judgement of court goes in their favor. It is a contingent gain which will materialize only when judgement is favorable.
It is not justified to include them in the financial statement as the gain has not been made. Also it is not certain whether such gain will at all be achieved or not. From convertesim point of view any income or gain which is not sure to be earned should not be included.
However it is the responsibility of company to disclose all facts in its report.So that it can project true and fair view of state of affairs of the concern. Hence there should be disclosure in the financial statement in detail about the contingent happenings.
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Do you think contingent gains should be disclosed in the financial sta (1).docx
1. Do you think contingent gains should be disclosed in the financial statements? Defend your
position.
Solution
Contingent gain or loss is a concept where the firm will suffer loss or will make gain only on
hapening of certain contingency or event in future. Suppose a company has claimed some money
for extra work. Disput arises regarding the inclution of those work in the contract escalation
clause. The dispute has been referred to court. The company will gain, if the judgement of court
goes in their favor. It is a contingent gain which will materialize only when judgement is
favorable.
It is not justified to include them in the financial statement as the gain has not been made. Also it
is not certain whether such gain will at all be achieved or not. From convertesim point of view
any income or gain which is not sure to be earned should not be included.
However it is the responsibility of company to disclose all facts in its report.So that it can project
true and fair view of state of affairs of the concern. Hence there should be disclosure in the
financial statement in detail about the contingent happenings.
