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. Furthermore, a company is prohibited from reporting a receivable in its balance sheet when it is expected to win a lawsuit even though that is probable and the amount of the expected gain can be reasonably estimated. Please give examples of explanations.

1. Does the expected loss meet the definition of a liability found in the conceptual framework? Explain
2. Does the expected gain meet the definition of an asset found in the conceptual framework? Explain
3. Why do you think accountants treat these seemingly similar situations differently? Explain