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a legal claim that is disputed by the company.

In some cases, it may not be clear whether a present obligation exists, even if there is a past event – e.g. Before an actual claim is made, the provision or loss contingency represents an ‘unasserted claim’.

For example, in the case of a legal claim filed by a customer injured by a company’s product, the past event is the actual incident in which the injury happened, which is when the provision (loss contingency) should be recognized – not when the claim was filed – assuming the other recognition criteria are met. Instead, the obligation is disclosed as a loss contingency unless its occurrence is remote.Īpplying these principles to a legal claim, the past event is the event that gives rise to the litigation, rather than the claim itself. Like IFRS, if any of these conditions is not met, no loss contingency is recognized. Instead, the obligation is disclosed as a contingent liability unless its occurrence is remote. If any of these conditions is not met, no provision is recognized.

Like IFRS the amount can be estimated reasonably.

In many cases, this difference will not change the practical outcome and the threshold will be met under both frameworks. Probable in this context means 'likely to occur', which is a higher threshold than IFRS.

It is probable that an outflow of resources (typically a payment) will be required to fulfill the obligation.

However, unlike IFRS, a constructive obligation is not recognized under the general model in ASC 450.

Like IFRS, a past event gives rise to a present obligation.

more likely than not – that an outflow of resources (typically a payment) will be required to fulfil the obligation.

A past event gives rise to a present obligation (legal or constructive).Recognize when all of the following criteria are met: