Remote describes a situation where the likelihood of a future event occurring is considered very low. In accounting, it often pertains to the probability of contingent liabilities materializing.
5 Must Know Facts For Your Next Test
Contingent liabilities classified as remote do not need to be recorded on the financial statements.
Only a disclosure in the notes is required if the liability is remote and could have significant consequences.
Financial standards like GAAP and IFRS use the term 'remote' to assess and report potential liabilities.
Auditors evaluate management's assessment of whether contingent liabilities are remote, possible, or probable.
Examples of remote contingencies include frivolous lawsuits with no substantial basis.