Perspectives

A roadmap to accounting for contingencies, loss recoveries, and guarantees

This Roadmap provides Deloitte’s insights into and interpretations of the accounting guidance in ASC 450 on loss contingencies, gain contingencies, and loss recoveries. In addition, the 2020 edition of this publication contains a new chapter on the accounting guidance in ASC 460 on guarantees.

We are pleased to present the 2020 edition of A Roadmap to Accounting for Contingencies, Loss Recoveries, and Guarantees. This Roadmap provides Deloitte’s insights into and interpretations of the accounting guidance in ASC 4501 on loss contingencies, gain contingencies, and loss recoveries. In addition, the 2020 edition of this publication contains a new chapter on the accounting guidance in ASC 460 on guarantees.

Although the guidance in ASC 450 has not changed significantly for decades, the application of the existing framework remains challenging at times because an entity may be required to use significant judgment in applying this guidance (e.g., legal interpretations are likely to be needed). Similarly, although the guidance in ASC 460 has not changed significantly for two decades, it may remain challenging to apply given the complexity of determining whether a guarantee is within the scope of ASC 460 as well as how guarantees should be accounted for in periods after their initial recognition and measurement.

In addition to summarizing the accounting framework in ASC 450 and ASC 460 and providing an in-depth discussion of key concepts, this Roadmap includes examples to illustrate how these concepts may be applied in practice. This publication reflects guidance that is effective for public business entities for annual reporting periods beginning on or after January 1, 2019, including the guidance in ASC 606, ASC 842, and ASC 326 on revenue, leases, and credit losses, respectively. For those entities that have not yet adopted ASU 2016-13 (which created ASC 326 on credit losses) and ASU 2016-02 (which created ASC 842 on leases), we have highlighted the pre-adoption Codification references in the relevant section.

Note that this Roadmap is not a substitute for the exercise of professional judgment, which is often essential to applying the requirements of ASC 450 and ASC 460, or for consulting with Deloitte professionals on complex accounting questions and transactions.

For the full titles of standards, topics, and regulations used in this publication, see Appendix B. For a list of abbreviations used in this publication, see Appendix C.

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Roadmap series publications are comprehensive, easy-to-understand accounting guides on selected topics of broad interest to the financial reporting community.

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