1. 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

2. 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

3. 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

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

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

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

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