A company is required to report a liability on its balance sheet when it expects to lose a lawsuit and the amount of the expected loss can be reasonably estimated $($FASB$)$ Conversely, a company is prohibited from reporting a receivable in its balance sheet when it expected to win a lawsuit even though that is probable and the amount of the expected gain can be reasonably estimated.

Does the expected loss meet the definition of a liability found in the conceptual framework? Explain

Does the expected gain meet the definition of an asset found in the conceptual framework? Explain

Why do you think accountants treat these seemingly similar situations differently? Explain Determined whether expected loss or gain meet the definition

of liability asset

What authoritative literature deals with gains and losses

Explain why expected loss and gain are treated differently

in accounting.

Explain a contingent liability and give an example

Wrote in a clear concise and organized manner;

demonstrated ethical scholarship in accurate representation

and attribution of sources, displayed accurate spelling,

grammar and punctuation