Question

Summarize FASB ASC 410-20-25-2

What does this statement mean?

Probable is used with its usual general meaning, rather than in a specific accounting or technical sense (such as that in paragraph 450-20-25-1), and refers to that which can reasonably be expected or believed on the basis of available evidence or logic but is neither certain nor proved (Webster’s New World Dictionary). Its inclusion in the definition is intended to acknowledge that business and other economic activities occur in an environment characterized by uncertainty in which few outcomes are certain (see paragraphs 44 through 48 of FASB Concepts Statement No. 6).

Answer 1

An item can be classified either as an Asset or as an Liability and measured in the financial staments after it satisfies certain conditions.But, satisfying conditions is not as easy as it is specified.Uncertainity is pervasive in Economic and business activities. This leads not to have an acccurate conclusion.

Difficulties can be seen in following cases:

1. Some items qualified as assets or liabilities of the entity under the definitions may, as a practical matter, have been recognized as expenses, losses, revenues, or gains

2. Unrecognized in its financial statements because of uncertainty about whether theyare qualified as assets or liabilities of the entity

3. Uncertainty at the time of assessment with regard to recognition and measurement considerations

So,when above difficulties does not exist, it is said that the probablity of recognition and measurement exists and the asset or Liability is recognised and measured accordingly.

As asked in the question, the term PROBABLE is used where all the given difficulties does not exist and can be reasonably expected but, it cannot be said as certain and proved to be accurate.