# ASC 450-20-25: Contingencies — Loss Contingencies — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/450/20/#25-recognition) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T00:27:12.550Z to 2026-09-10T00:27:12.550Z Record version: sha256:e66df42e9fe4bc581a5bbb6f9f91c6dee58e65ba1c0ab2556e5f3c2b819dc09c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 450-20-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/450/20/#25-recognition) SEC content: no #### General Rule ##### [450-20-25-1](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:12.550Z to 2026-09-10T00:27:12.550Z Record version: sha256:7bc8717da267e0c542e2e5fdff6bff22d393ae39aa229ede7a307d92141f3f5c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When a [loss contingency](https://asc.understandingaccounting.org/glossary/l/#loss-contingency "An existing condition, situation, or set of circumstances involving uncertainty as to possible loss to an entity that will ultimately be resolved when one or more future events occur or fail to occur. The term loss is used for convenience to include many charges against income that are commonly referred to as expenses and others that are commonly referred to as losses.") exists, the likelihood that the future event or events will confirm the loss or impairment of an asset or the incurrence of a liability can range from [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") to [remote](https://asc.understandingaccounting.org/glossary/r/#remote "The chance of the future event or events occurring is slight."). As indicated in the definition of [contingency](https://asc.understandingaccounting.org/glossary/c/#contingency "An existing condition, situation, or set of circumstances involving uncertainty as to possible gain (gain contingency) or loss (loss contingency) to an entity that will ultimately be resolved when one or more future events occur or fail to occur."), the term _loss_ is used for convenience to include many charges against income that are commonly referred to as expenses and others that are commonly referred to as losses. The Contingencies Topic uses the terms _probable_, [reasonably possible](https://asc.understandingaccounting.org/glossary/r/#reasonably-possible "The chance of the future event or events occurring is more than remote but less than likely."), and _remote_ to identify three areas within that range. ##### [450-20-25-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:12.550Z to 2026-09-10T00:27:12.550Z Record version: sha256:09836dfbc6c00a3f9ab8891b5e23ca38bd39d13e79e7c9b6d325b8555339eb64 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An estimated loss from a loss contingency shall be accrued by a charge to income if both of the following conditions are met: 1. a Information available before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25) indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements. Date of the financial statements means the end of the most recent accounting period for which financial statements are being presented. It is implicit in this condition that it must be probable that one or more future events will occur confirming the fact of the loss. 2. b The amount of loss can be reasonably estimated. The purpose of those conditions is to require accrual of losses when they are reasonably estimable and relate to the current or a prior period. Paragraphs [450-20-55-1 through 55-17](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-1) and Examples 1-2 (see paragraphs [450-20-55-18 through 55-35](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-18) ) illustrate the application of the conditions. As discussed in paragraph [450-20-50-5](https://asc.understandingaccounting.org/asc/450/20/#450-20-50-5), disclosure is preferable to accrual when a reasonable estimate of loss cannot be made. Further, even losses that are reasonably estimable shall not be accrued if it is not probable that an asset has been impaired or a liability has been incurred at the date of an entity's financial statements because those losses relate to a future period rather than the current or a prior period. Attribution of a loss to events or activities of the current or prior periods is an element of asset impairment or liability incurrence. #### Assessing Probability of Incurrence of a Loss ##### [450-20-25-3](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:12.550Z to 2026-09-10T00:27:12.550Z Record version: sha256:3d221cff8be31e00d745d2e44dad4c304abc4f949e790e9778a508d53f67b44c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The conditions in the preceding paragraph are not intended to be so rigid that they require virtual certainty before a loss is accrued. Instead, the condition in (a) in the preceding paragraph is intended to proscribe accrual of losses that relate to future periods. #### Assessing Whether a Loss Is Reasonably Estimable ##### [450-20-25-4](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:12.550Z to 2026-09-10T00:27:12.550Z Record version: sha256:ce3050a4b06a90e6a6e3081986f835e047259b05fee0def796ae48f804f673b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The condition in paragraph [450-20-25-2(b)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) is intended to prevent accrual in the financial statements of amounts so uncertain as to impair the integrity of those statements. ##### [450-20-25-5](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:12.550Z to 2026-09-10T00:27:12.550Z Record version: sha256:24e670cacf006bd826ff933a0d921cabe534f535ddf65168cfa2ba56600e61dc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. That requirement shall not delay accrual of a loss until only a single amount can be reasonably estimated. To the contrary, when the condition in paragraph [450-20-25-2(a)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) is met and information available indicates that the estimated amount of loss is within a range of amounts, it follows that some amount of loss has occurred and can be reasonably estimated. Thus, when the condition in paragraph [450-20-25-2(a)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) is met with respect to a particular loss contingency and the reasonable estimate of the loss is a range, the condition in paragraph [450-20-25-2(b)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) is met and an amount shall be accrued for the loss. #### Events After the Date of the Financial Statements ##### [450-20-25-6](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:12.550Z to 2026-09-10T00:27:12.550Z Record version: sha256:41fc7a191e7f42680e924989edd4e1f523abb52bb9e21354524673aad3e692c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After the date of an entity's financial statements but before those financial statements are issued or are available to be issued (as discussed in Section 855-10-25), information may become available indicating that an asset was impaired or a liability was incurred after the date of the financial statements or that there is at least a reasonable possibility that an asset was impaired or a liability was incurred after that date. The information may relate to a loss contingency that existed at the date of the financial statements, for example, an asset that was not insured at the date of the financial statements. On the other hand, the information may relate to a loss contingency that did not exist at the date of the financial statements, for example, threat of expropriation of assets after the date of the financial statements or the filing for bankruptcy by an entity whose debt was guaranteed after the date of the financial statements. In none of the cases cited in this paragraph was an asset impaired or a liability incurred at the date of the financial statements, and the condition for accrual in paragraph [450-20-25-2(a)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) is, therefore, not met. ##### [450-20-25-7](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:12.550Z to 2026-09-10T00:27:12.550Z Record version: sha256:29fad75b1a441977a0fe13a2a3ea4b9daf5a9b1e4632008bfde3ed5f6807b5b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a loss cannot be accrued in the period when it is probable that an asset had been impaired or a liability had been incurred because the amount of loss cannot be reasonably estimated, the loss shall be charged to the income of the period in which the loss can be reasonably estimated and shall not be charged retroactively to an earlier period. All estimated losses for loss contingencies shall be charged to income rather than charging some to income and others to retained earnings as prior period adjustments. #### Business Risks ##### [450-20-25-8](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:12.550Z to 2026-09-10T00:27:12.550Z Record version: sha256:2cf458cd182401ca3e7215c5b30f3324efc2c7d7780c14b8ed46664eca154c2e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. General or unspecified business risks do not meet the conditions for accrual in paragraph [450-20-25-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2), and no accrual for loss shall be made.