Loss Contingencies

A loss contingency is an existing condition, situation, or set of circumstances that involves uncertainty as to possible loss that will be resolved when one or more future events occur or fail to occur. An estimated loss (or expense) from a loss contingency (for example, pending or threatened litigation) must be accrued by a charge to income if it is probable that an asset has been impaired or a liability incurred as of the report date and the amount of the loss can be reasonably estimated.
A contingency that might result in a gain, for example, the filing of an insurance claim, shall not be recognized as income prior to realization.
For further information, see ASC Subtopic 450-20, Contingencies