Schedule R – Contingent Liabilities FY 2018 YEAR-END TRAINING Schedule R – Contingent Liabilities Presenter: Mary Yip Auditor-Controller’s Office 2018 Year End Training – Chapter 13

Schedule R – Contingent Liabilities Transaction Type A contingent liability is a potential liability. It depends on a future event occurring or not occurring. Examples: guarantees, pending lawsuits, unsettled purchase orders, uncompleted contracts Recognition Criteria If the contingency is both probable and the amount can be estimated, then, the liability should be accrued by journal entry at fiscal year end. If a contingent liability is only possible (not probable), or if the amount cannot be estimated, a journal entry is not required. However, the event should be disclosed in the footnote to the financial statement. If a contingent liability is remote, then neither a journal entry nor a footnote is required. 2018 Year End Training – Chapter 13

Schedule R – Contingent Liabilities Scenario: The State of California has filed a lawsuit claim against the Example Department. The estimated claim amount is $500,000 and the date the lawsuit is projected to be resolved is 8/16/18. The Department lawyers claim the State will succeed in the lawsuit at the time of resolution. 2018 Year End Training – Chapter 13

Schedule R – Contingent Liabilities 2018 Year End Training – Chapter 13

Schedule R – Accrual Journal Entry 2018 Year End Training – Chapter 13

Schedule R – Reversal Journal Entry 2018 Year End Training – Chapter 13

Schedule R – Contingent Liabilities Mail Schedule R and Supporting Documents to ACO Year-End Mail Stop #1050 Questions? Submit them by email to acoyearend@rivco.org 2018 Year End Training – Chapter 13 7