Practice prompt · Q:loss-contingencies/transfer-reporting-date-condition-001

Decide whether a January incident changes the year-end statements

Transfers the ASC 450 reporting date analysis to a new condition that arises after year end.

Updated Sep 20, 2026 Review due Nov 20, 2026

Practice

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Ridgeway Manufacturing reports on December 31, 2026. Equipment worked as intended at year end, but a customer incident damaged it on January 8, 2027. Before Ridgeway issues its statements, an unfavorable outcome from the incident is supplied as probable and a $150,000 to $220,000 loss range is reasonably estimable. What should Ridgeway do in its 2026 financial statements?

Choose the best answer. A Accrue $150,000 in 2026 because the loss became probable before the statements were issued. B Accrue $185,000, the midpoint of the range, because the incident is probable. C Do not accrue the incident in 2026; evaluate it under the subsequent-event disclosure requirements. D Omit the incident because every event after year end belongs only in the next year's records.

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Answer: C

C. The January 8 incident created a new condition after the December 31 reporting date. Ridgeway does not accrue that loss in 2026 and must complete the applicable subsequent-event disclosure analysis.