Remote

Definition

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

1. Contingent liabilities classified as remote do not need to be recorded on the financial statements.
2. Only a disclosure in the notes is required if the liability is remote and could have significant consequences.
3. Financial standards like GAAP and IFRS use the term 'remote' to assess and report potential liabilities.
4. Auditors evaluate management's assessment of whether contingent liabilities are remote, possible, or probable.
5. Examples of remote contingencies include frivolous lawsuits with no substantial basis.

Review Questions

• What does it mean when a contingent liability is classified as remote?
• How should remote contingent liabilities be reported in financial statements?
• Why might auditors focus on management's assessment of remote contingencies?

Related terms

Possible:

A classification for contingent liabilities where the event might occur but is not likely or probable.

Probable:

A classification for contingent liabilities where the event is likely to occur and typically requires recording in financial statements.

Disclosure:

The act of providing information about certain items in the notes of financial statements rather than on their face.