A finished ACC-371 Topic 5 contingency recognition dq example, testing two lawsuits for probability and a reasonable estimate and accruing only the one that meets both conditions. Searches like "acc 371 topic 5 assignment example", "acc371 topic 5 sample" and "acc-371 topic 5 example" land here.
What a finished ACC-371 Topic 5 contingency recognition dq looks like
The post takes its position in the first line: a loss is accrued only when it is probable and reasonably estimable, and a strong feeling about a case satisfies neither condition. Two illustrative claims carry the argument. In the first, a product injury suit, counsel judges an unfavorable outcome probable and puts the loss between $300,000 and $900,000 with no figure in that range more likely than another, so the post accrues the $300,000 minimum and discloses the possible $600,000 more. In the second, a patent claim, counsel calls the chance of losing reasonably possible and offers an estimate of $2,000,000. The post discloses it and records nothing, even though that amount is larger and easier to state. It then identifies the development that would move the patent case onto the books, and a question to classmates closes it.
How an ACC-371 Topic 5 example is structured
Four short paragraphs and a reply prompt make up the post. The opening sentence states the recognition rule and its two conditions, so classmates can test each case against something fixed. The first case follows, set out with the facts counsel supplied: the probability assessment, the range and the absence of a best estimate. That paragraph accrues the minimum of the range and explains why the midpoint is not used under US GAAP. The second case applies the same two conditions and fails the first, which sends it to disclosure alone, with the estimate included in the note. A fourth paragraph addresses gain contingencies briefly, since the company's counterclaim tends to surface, and states that gains are generally not recognized before they are realized. One citation to the assigned textbook supports the rule. Its final line asks classmates what evidence would lead counsel to upgrade the patent claim to probable.
The rule stated before either case
Probable and reasonably estimable are named as the two conditions in the first sentence, giving every later conclusion a fixed test to be checked against.
A range with no best estimate
Counsel's $300,000 to $900,000 range has no more likely point, so the minimum is accrued and the remaining $600,000 of exposure goes into the note.
A larger claim that is only possible
The patent suit's $2,000,000 estimate is disclosed and not recorded, because a reasonably possible loss fails the first condition however precisely it can be measured.
Gains kept off the books
The company's counterclaim is mentioned and left unrecognized, since US GAAP generally waits for a gain contingency to be realized before any amount is recorded.
A reply prompt about evidence
Classmates are asked what development, a ruling or a settlement offer, would make counsel call the patent loss probable and move it into the accounts.
Where marks go in ACC-371 Topic 5
In the thread, posts most often give up credit by treating the size of a claim as though it were its probability. Accruing the $2,000,000 patent claim because the number is large and specific records a loss that is only reasonably possible, the classic recognition error here. Booking the midpoint of the $300,000 to $900,000 range, when nothing makes the midpoint more likely, borrows a measurement rule from international standards that has no place under US GAAP. A post that accrues the minimum and omits disclosure of the further exposure has done half of what the guidance asks. Answers asserting a case is probable, without saying who assessed it, never apply the test. Replies that simply agree with a classmate add nothing, and many rubrics reward a reply that brings a different claim to the same two conditions.
Get an ACC-371 Topic 5 example written to your instructions
Send the ACC-371 Topic 5 discussion question, the participation rubric and any contingency case your section posted. We write a custom example to those, with both recognition conditions stated first, each claim tested against them, the accrual or disclosure decided and a reply prompt that moves the thread forward, in 24 to 48 hours. The first one is free.
ACC-371 Topic 5 questions, answered
What does probable mean for a loss contingency?
Under US GAAP, likely to occur, which is a higher threshold than more likely than not. Reasonably possible covers the middle ground, more than remote but less than likely, and remote means slight. The categories come from the judgment of counsel and management about the specific claim, so a post has to say whose assessment it relies on. Only the probable category, with an estimable amount, leads to an accrual.
Why accrue the minimum instead of the midpoint?
Because US GAAP calls for it when no amount within a range is a better estimate than any other. The minimum is recorded and the additional possible loss is disclosed. If one amount in the range is more likely, that amount is accrued instead. International standards use the midpoint in the equal-likelihood case, which is why posts drawing on IFRS material sometimes reach a different figure from the same facts.
Does a remote claim need any disclosure?
Generally not, for litigation. A claim whose chance of loss is slight is usually left out of the notes entirely, since disclosing every remote suit would bury the ones that matter. Guarantees are the familiar exception, disclosed even when a loss is remote. A post that finds a claim remote should still say why, because the classification is itself a judgment that a reader may question.