# ASC 450-20-55: Contingencies — Loss Contingencies — 55 Implementation Guidance and Illustrations Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/450/20/#55-implementation-guidance-and-illustrations) 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): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:a04b6b91f66670a50d98516d38938881cadca12a3f1767bf667baab7d0ef51e5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 450-20-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/450/20/#55-implementation-guidance-and-illustrations) SEC content: no #### Implementation Guidance ##### [450-20-55-1](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:960ca80f66a2641b3c2a719d8d298344811a70a1185713b173a4271e8a8a8393 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section includes implementation guidance for the application of the conditions for accrual of [loss contingencies](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.") and for the disclosure requirements of this Subtopic. This guidance does not address all possible applications of the requirements of this Subtopic. Therefore, accrual and disclosure of loss contingencies should be based on an evaluation of the facts and circumstances in each particular situation. ##### [450-20-55-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:84e130972eac0be52a6c1d85f8b68316532d71f3862b8548d86ee1f6a2534402 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If it is [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") that a claim resulting from injury or damage caused by a product defect will arise with respect to products or services that have been sold, accrual for losses may be appropriate. The condition in paragraph [450-20-25-2(a)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) would be met, for instance, with respect to a drug product or toys that have been sold if a health or safety hazard related to those products is discovered and as a result it is considered probable that liabilities have been incurred. The condition in paragraph [450-20-25-2(b)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) would be met if experience or other information enables the entity to make a reasonable estimate of the loss with respect to the drug product or the toys. ##### [450-20-55-3](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:97897c37ae5d98abf24c44fb19e43fba9ebaf7121c72cd6ac8136504684f9597 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the date of an entity's financial statements, it may not be insured against risk of future loss or damage to its property by fire, explosion, or other hazards. Some risks, for all practical purposes, may be noninsurable, and the self-assumption of those risks is mandatory. ##### [450-20-55-4](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:31007af635a6f0aad707dc3137eb60910a9f6645c9d6cd893492c6a08cf4376b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The absence of insurance against losses from risks of those types constitutes an existing condition involving uncertainty about the amount and timing of any losses that may occur, in which case 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. Uninsured risks may arise in a number of ways, including the following: 1. a Noninsurance of certain risks 2. b Co-insurance or deductible clauses in an insurance contract 3. c Insurance through a subsidiary or investee to the extent not reinsured with an independent insurer. (The effects of transactions between a parent or other investor and a subsidiary or investee insurance entity should be eliminated from an entity's financial statements in accordance with paragraphs [810-10-45-1](https://asc.understandingaccounting.org/asc/810/10/#810-10-45-1) and [323-10-35-7](https://asc.understandingaccounting.org/asc/323/10/#323-10-35-7).) ##### [450-20-55-5](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:250801cc733233aadf7a8fa1c0ce0b712be672dbc462781db78fbe5c0c703d7b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The absence of insurance does not mean that an asset has been impaired or a liability has been incurred at the date of an entity's financial statements. Fires, explosions, and other similar events that may cause loss or damage of an entity's property are random in their occurrence. With respect to events of that type, the condition in paragraph [450-20-25-2(a)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) is not satisfied prior to the occurrence of the event because until that time there is no diminution in the value of the property. There is no relationship of those events to the activities of the entity prior to their occurrence, and no asset is impaired prior to their occurrence. Further, unlike an insurance entity, which has a contractual obligation under policies in force to reimburse insureds for losses, an entity can have no such obligation to itself and, hence, no liability. ##### [450-20-55-6](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:536579edd91fcfefb6b3aef2b17abd70b0cbd86843b59996ea6035a7a080f26e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity may choose not to purchase insurance against risk of loss that may result from injury to others, damage to the property of others, or interruption of its business operations. Exposure to risks of those types constitutes an existing condition involving uncertainty about the amount and timing of any losses that may occur, in which case a [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.") exists. ##### [450-20-55-7](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:a2563a891a77370151d0ceca24d6f315f55cb3bf438255107eb102bdb574c65c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Mere exposure to risks of those types, however, does not mean that an asset has been impaired or a liability has been incurred. The condition in paragraph [450-20-25-2(a)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) is not met with respect to loss that may result from injury to others, damage to the property of others, or business interruption that may occur after the date of an entity's financial statements. Losses of those types do not relate to the current or a prior period but rather to the future period in which they occur. Thus, for example, an entity with a fleet of vehicles should not accrue for injury to others or damage to the property of others that might be caused by those vehicles in the future even if the amount of those losses may be reasonably estimable. ##### [450-20-55-8](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:2e05347e573e2afd72bea2fb1de6a0da8d1a5084a939d2cf6ff0448b13a19136 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On the other hand, the conditions in paragraph [450-20-25-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) would be met with respect to uninsured losses resulting from injury to others or damage to the property of others if both of the following are true: 1. a The event took place prior to the date of the financial statements, even though the entity may not become aware of those matters until after that date. 2. b The experience of the entity or other information enables it to make a reasonable estimate of the loss that was incurred prior to the date of its financial statements. Injury or damage resulting from products that have been sold are discussed in paragraph [450-20-55-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-2). ##### [450-20-55-9](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:20e3a856ca676de849a83046cf79ab1f5faa429939d10cbb24f5de03d8fb3b0b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The threat of expropriation of assets is a contingency (as defined) because of the uncertainty about its outcome and effect. The condition in paragraph [450-20-25-2(a)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) is met if both of the following are true: 1. a Expropriation is imminent. 2. b Compensation will be less than the carrying amount of the assets. Imminence may be indicated, for example, by public or private declarations of intent by a government to expropriate assets of the entity or actual expropriation of assets of other entities. The condition in paragraph [450-20-25-2(b)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) requires that accrual be made only if the amount of loss can be reasonably estimated. If the conditions for accrual are not met, the disclosures described in paragraphs [450-20-50-3 through 50-8](https://asc.understandingaccounting.org/asc/450/20/#450-20-50-3) would be made if there is at least a reasonable possibility that an asset has been impaired. ##### [450-20-55-10](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:e4caf5ae9c54254b50daa1ea866ded5d6c1bf811b625dc7afc442c9dc43770ac Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following factors should be considered in determining whether accrual and/or disclosure is required with respect to pending or threatened litigation and actual or possible claims and assessments: 1. a The period in which the underlying cause (that is, the cause for action) of the pending or threatened litigation or of the actual or possible claim or assessment occurred 2. b The degree of probability of an unfavorable outcome 3. c The ability to make a reasonable estimate of the amount of loss. Examples 1 through 2 (see paragraphs [450-20-55-18 through 55-35](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-18) ) illustrate the consideration of these factors in determining whether to accrue or disclose litigation. ##### [450-20-55-11](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-11) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:b5cc8286921e69e6debcccb9a26269b3b6817a8bc7e5171b8ec1adf6272ff74d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Accrual may be appropriate for litigation, claims, or assessments whose underlying cause is an event occurring on or before the date of an entity's financial statements even if the entity does not become aware of the existence or possibility of the lawsuit, claim, or assessment until after the date of the financial statements. If those financial statements have not been issued or are not yet available to be issued (as discussed in Section 855-10-25), accrual of a loss related to the litigation, claim, or assessment would be required if the probability of loss is such that the condition in paragraph [450-20-25-2(a)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) is met and the amount of loss can be reasonably estimated. ##### [450-20-55-12](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-12) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:79b5b91cf8b663419425d6cbbfb13ccf68a8f2875dad38c423144bc918b3559f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the underlying cause of the litigation, claim, or assessment is an event occurring before the date of an entity's financial statements, the probability of an outcome unfavorable to the entity must be assessed to determine whether the condition in paragraph [450-20-25-2(a)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) is met. Among the factors that should be considered are the following: 1. a The nature of the litigation, claim, or assessment 2. b The progress of the case (including progress after the date of the financial statements but before those statements are issued or are available to be issued \[as discussed in Section 855-10-25\]) 3. c The opinions or views of legal counsel and other advisers, although, the fact that legal counsel is unable to express an opinion that the outcome will be favorable to the entity should not necessarily be interpreted to mean that the condition in paragraph [450-20-25-2(a)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) is met 4. d The experience of the entity in similar cases 5. e The experience of other entities 6. f Any decision of the entity's management as to how the entity intends to respond to the lawsuit, claim, or assessment (for example, a decision to contest the case vigorously or a decision to seek an out-of-court settlement). ##### [450-20-55-13](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-13) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:e5ca161e22fa824e2fd49e8be2ae9a8b7e167bf2ff71167b9eb6ab27976c571a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The filing of a suit or formal assertion of a claim or assessment does not automatically indicate that accrual of a loss may be appropriate. The degree of probability of an unfavorable outcome must be assessed. The condition in paragraph [450-20-25-2(a)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) would be met if an unfavorable outcome is determined to be probable. Accrual would be inappropriate, but disclosure would be required, if an unfavorable outcome is determined to be [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.") but not probable, or if the amount of loss cannot be reasonably estimated. ##### [450-20-55-14](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-14) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:edb08ba6bb6256655c8aafa62701d9a98a3c69e32f55e6fccfc312921d4168f4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. With respect to unasserted claims and assessments, an entity must determine the degree of probability that a suit may be filed or a claim or assessment may be asserted and the possibility of an unfavorable outcome. If an unfavorable outcome is probable and the amount of loss can be reasonably estimated, accrual of a loss is required by paragraph [450-20-25-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2). For example: 1. a A catastrophe, accident, or other similar physical occurrence predictably engenders claims for redress, and in such circumstances their assertion may be probable. 2. b An investigation of an entity by a governmental agency, if enforcement proceedings have been or are likely to be instituted, is often followed by private claims for redress, and the probability of their assertion and the possibility of loss should be considered in each case. 3. c An entity may believe there is a possibility that it has infringed on another entity's patent rights, but the entity owning the patent rights has not indicated an intention to take any action and has not even indicated an awareness of the possible infringement. In that case, a judgment must first be made as to whether the assertion of a claim is probable. ##### [450-20-55-15](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-15) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:ca36103a31a2c9eeae0921507830851c1e546e4e4dd74ad0745884d764e990b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the judgment is that assertion is not probable, no accrual or disclosure would be required. On the other hand, if the judgment is that assertion is probable, then a second judgment must be made as to the degree of probability of an unfavorable outcome. The disclosures described in paragraphs [450-20-50-3 through 50-8](https://asc.understandingaccounting.org/asc/450/20/#450-20-50-3) would be required in either of the following circumstances: 1. a An unfavorable outcome is probable but the amount of loss cannot be reasonably estimated. 2. b An unfavorable outcome is reasonably possible but not probable. ##### [450-20-55-16](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-16) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:ed53e3134f424f3e8d9ed48866a592730eeef00e140881ec4416e504fa36152a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As a condition for accrual of a loss contingency, the condition in paragraph [450-20-25-2(b)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) requires that the amount of loss can be reasonably estimated. In some cases, it may be determined that a loss was incurred because an unfavorable outcome of the litigation, claim, or assessment is probable (thus satisfying the condition in paragraph [450-20-25-2\[a\]](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2)), but the range of possible loss is wide. Examples 1 and 3 (see paragraphs [450-20-55-18](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-18) and [450-20-55-36](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-36)) illustrate the application of the standards in this Subtopic when the range of possible loss is wide. ##### [450-20-55-17](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-17) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:739ab517e13db0198d307323eb08e661d7363dfbb0d5f32bbb2afc5033a48f7e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As a condition for accrual of a loss contingency, the condition in paragraph [450-20-25-2(a)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) requires that information available before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25) indicate that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements. Accordingly, accrual would clearly be inappropriate for litigation, claims, or assessments whose underlying cause is an event or condition occurring after the date of financial statements but before those financial statements are issued or are available to be issued. For example, an entity would not accrue a suit for damages alleged to have been suffered as a result of an accident that occurred after the date of the financial statements. However, disclosure may be required by paragraphs [450-20-50-9 through 50-10](https://asc.understandingaccounting.org/asc/450/20/#450-20-50-9) . ##### [450-20-55-17A](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-17A) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:617b710a571d140f5edcaf177b819a87dd496d2cf67fe5a8cc5cb36f145ec5a1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic does not prohibit (and, in fact, requires) accrual of a net loss (that is, a loss in excess of deferred premiums) that probably will be incurred on insurance policies that are in force, provided that the loss can be reasonably estimated. #### Illustrations ##### [450-20-55-18](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-18) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:3c8174e9cc4121f69136ce7e7c078edab70e44780181d8a4a3c8ae6975f29877 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity may be litigating a dispute with another party. In preparation for the trial, it may determine that, based on recent developments involving one aspect of the litigation, it is probable that it will have to pay $2 million to settle the litigation. Another aspect of the litigation may, however, be open to considerable interpretation, and depending on the interpretation by the court the entity may have to pay an additional $8 million over and above the $2 million. ##### [450-20-55-19](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-19) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:451dc868260036ef0c9a6fb252e29368d90284020ee9e7570b9b1b59980ea603 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In that case, paragraph [450-20-25-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) requires accrual of the $2 million if that is considered a reasonable estimate of the loss. ##### [450-20-55-20](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-20) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:755b33e3b6168aaca97d0475dc05851a1f10d57a9e93e1f8d5b1ce061ea99705 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [450-20-50-1 through 50-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-50-1) require disclosure of the nature of the accrual, and depending on the circumstances, may require disclosure of the $2 million that was accrued. ##### [450-20-55-21](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-21) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:939eb533b8dbddaa1cfe8e2d3b54959fdde585c548a9315b589cfa51ee9f4c10 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [450-20-50-3 through 50-8](https://asc.understandingaccounting.org/asc/450/20/#450-20-50-3) require disclosure of the additional exposure to loss if there is a reasonable possibility that the additional amounts will be paid. ##### [450-20-55-22](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-22) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:49fb8397772cd881b1b8ecc0c675f90c0ecbd34fa3cfbfcc5699b276f6301cec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Cases illustrate application of the accrual and disclosure requirements in the following stages of litigation: 1. a The trial is complete but the damages are undetermined (Case A). 2. b The trial is incomplete but an unfavorable outcome is probable (Case B). 3. c The trial is incomplete and unfavorable outcome is reasonably possible (Case C). 4. d There is a range of loss and one amount is a better estimate than any other (Case D). ##### [450-20-55-23](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-23) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:8a3f9c26b4c065fd41821f3081e4b8daf51f0400f398c1365e0048a6cdb8834a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity is involved in litigation at the close of its fiscal year and information available indicates that an unfavorable outcome is probable. Subsequently, after a trial on the issues, a verdict unfavorable to the entity is handed down, but the amount of damages remains unresolved at the time the financial statements are issued or are available to be issued (as discussed in Section 855-10-25). Although the entity is unable to estimate the exact amount of loss, its reasonable estimate at the time is that the judgment will be for not less than $3 million or more than $9 million. No amount in that range appears at the time to be a better estimate than any other amount. ##### [450-20-55-24](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-24) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:88fc893fbe9cdd56f6e76d6ea02744ea0ab0c02e2227621a989c9a3d858cb39f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In this Case, paragraph [450-20-30-1](https://asc.understandingaccounting.org/asc/450/20/#450-20-30-1) requires accrual of the $3 million (the minimum of the range) at the close of the fiscal year. ##### [450-20-55-25](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-25) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:615016591427505efd28c3d704d90ae3a8fa97bf328d237a711c30aecad457bc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [450-20-50-1 through 50-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-50-1) require disclosure of the nature of the contingency and, depending on the circumstances, may require disclosure of the amount of the accrual. ##### [450-20-55-26](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-26) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:baea3f47da1dd5804297e0272e15f2ef594305394990903beb8518b2f7c8070a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [450-20-50-3 through 50-8](https://asc.understandingaccounting.org/asc/450/20/#450-20-50-3) require disclosure of the exposure to an additional amount of loss of up to $6 million. ##### [450-20-55-27](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-27) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:f506dd25715d97988138d4e5bec17b6701f3d9d468b21cb42ed19991d9500aad Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Assume the same facts as in Case A, except it is probable that a verdict will be unfavorable and the trial has not been completed before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25). In that situation, the condition in paragraph [450-20-25-2(a)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) would be met because information available to the entity indicates that an unfavorable verdict is probable. An assessment that the range of loss is between $3 million and $9 million would meet the condition in paragraph [450-20-25-2(b)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2). ##### [450-20-55-28](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-28) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:547739ca92b5062141c7c16ae6cf8283661ba1968232debe497dfd9012cfe15a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In this Case, if no single amount in that range is a better estimate than any other amount, paragraph [450-20-30-1](https://asc.understandingaccounting.org/asc/450/20/#450-20-30-1) requires accrual of $3 million (the minimum of the range) at the close of the fiscal year. ##### [450-20-55-29](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-29) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:dbe27e92f3883bb188f0c80fbbf94aed175ea0db2dbb2dd1a3de5f5d20c1893c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [450-20-50-1 through 50-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-50-1) require disclosure of the nature of the contingency and, depending on the circumstances, may require disclosure of the amount of the accrual. ##### [450-20-55-30](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-30) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:883d6297b16cb5dc3252eabc83d40ada0968a13ea3f463d1a4dab4cd8e07fc41 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraphs 450-20-50-3 through 50-8](https://asc.understandingaccounting.org/asc/450/20/#450-20-50-3) require disclosure of the exposure to an additional amount of loss of up to $6 million. ##### [450-20-55-31](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-31) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:0478f5786806d61baa1c5006ee016c6f6f6e6f68f6aa061d8a5dbd00529e85c7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Assume the same facts as in Case B, except the entity had assessed the verdict differently (for example, that an unfavorable verdict was not probable but was only reasonably possible). The condition in paragraph [450-20-25-2(a)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) would not have been met and no amount of loss would be accrued. Paragraphs [450-20-50-3 through 50-8](https://asc.understandingaccounting.org/asc/450/20/#450-20-50-3) require disclosure of the nature of the contingency and any amount of loss that is reasonably possible. ##### [450-20-55-32](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-32) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:44bcb8b1cea52d13973351ec6da0900fd340171435b846acff4ff6e30125dc7c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Assume that in Case A and Case B the condition in paragraph [450-20-25-2(a)](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) has been met and a reasonable estimate of loss is a range between $3 million and $9 million but a loss of $4 million is a better estimate than any other amount in that range. ##### [450-20-55-33](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-33) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:4a457d62d478b877fed3a092c84115e58a6fb17dbbf748df7f6a2e8ef76ce6c8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In this Case, paragraph [450-20-30-1](https://asc.understandingaccounting.org/asc/450/20/#450-20-30-1) requires accrual of $4 million. ##### [450-20-55-34](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-34) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:34f1055a43214ea7a3b4e0c196227ed0959e830d9140f8002aa77450f0928374 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [450-20-50-1 through 50-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-50-1) require disclosure of the nature of the contingency and, depending on the circumstances, may require disclosure of the amount of the accrual. ##### [450-20-55-35](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-35) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:6184303926d6fa6391800f4a1cd6319d920d9b89d842c5d681304f1bd83515ca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [450-20-50-3 through 50-8](https://asc.understandingaccounting.org/asc/450/20/#450-20-50-3) require disclosure of the exposure to an additional amount of loss of up to $5 million. ##### [450-20-55-36](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-36) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:5261be1111d9897189ada13ba73ea65c247750726af9d302cbc552d23fcb3092 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entity A is the defendant in litigation involving a major competitor claiming patent infringement (Entity B). The suit claims damages of $200 million. Discovery has been completed, and Entity A is engaged in settlement discussions with the plaintiff. Entity A has made an offer of $5 million to settle the case, which offer was rejected by the plaintiff; the plaintiff has made an offer of $35 million to settle the case, which offer was rejected by Entity A. Based on the expressed willingness of the plaintiff to settle the case along with information revealed during discovery and the likely cost and risk to both sides of litigating, Entity A believes that it is probable the case will not come to trial. Accordingly, Entity A has determined that it is probable that it has some liability. Entity A's reasonable estimate of this liability is a range between $10 million and $35 million, with no amount within that range a better estimate than any other amount; accordingly, $10 million was accrued. ##### [450-20-55-37](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-37) Pending content: no Source downloaded (UTC): 2026-09-10T00:27:21.859Z to 2026-09-10T00:27:21.859Z Record version: sha256:7adddbcde0d197676bb9496bd33b728d3ccc01429421521e41f065677a9c3499 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entity A provides the following disclosure in accordance with Section 450-20-50. - On March 15, 19X1, Entity B filed a suit against the company claiming patent infringement. While the company believes it has meritorious defenses against the suit, the ultimate resolution of the matter, which is expected to occur within one year, could result in a loss of up to $25 million in excess of the amount accrued.