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Gain Contingency

The accounting for gain contingency is a potential or pending development thay may result in a future gain to the company. For example, a successful lawsuit against another company. Another example would be an insurance recovery. If the insurance recovery is likely, that part of an insurance claim that relates to recovery of an incurred loss may be recognized when the loss is recognized. This is dependent that there is no indication that the insurance company will not dispute the claim. As a rule, claims in excess of the loss would only be recorded once the insurance provider acknowledges they will cover such gains. (Note: insurance recoveries for lost revenues are not included in the special consideration for insurance recoveries)

Conserative accounting practice dicates that gain contigencies should not be booked, although footnote disclosure of the particulars may be made.

Disclaimer: This blog is for information purposes only and is not intended to provide investing, accounting, tax or legal advice and should not be relied upon.

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