FASB #5 is about accounting for contingent liabilities. First, contingency “is an existing condition, situation, or set of circumstances involving uncertainty as to possible gain or loss to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur”. Example of loss contingencies are collectability of receivables, pending or threatened litigation, actual or possible claims and assessments, risk of loss or damage of enterprise property guarantees of indebtedness of others, etc.. A loss from a loss contingency will be accrued by a charge to income only when two conditions are met: information available before preparing the financial statements shows that “it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements”. This condition must be probable that one or more events will happen in the future to conform the loss. The second condition is the amount of loss can be reasonably estimated. The amount of loss must be reasonably estimated to prevent accrual in financial statements, if the amount is uncertain, that could affect the accuracy of those statements. For investors, it is easier for them to make a decision whether to invest or not invest in a company when they see accurate numbers. Companies can’t reduce the number of loss so investors don’t know. Also, if companies fail to record contingent liabilities, they can overstate their net income or shareholders’ equity, investors can avoid that by reading carefully the company’s footnotes. Investors can exam closely to see if a company has contingent liabilities or not since events in the future can affect it. For example, if a company is sued by a competitor, and they think that they probably will lose the case, they would have contingent liability on its balance sheet. However, if