3.1 Overview

ASC 450-30-20 defines a gain contingency as an “existing condition, situation, or set of circumstances involving uncertainty as to possible gain to an entity that will ultimately be resolved when one or more future events occur or fail to occur.” This chapter provides an overview of the accounting and disclosure requirements for gain contingencies, along with certain interpretive guidance on how to apply the gain contingency model. Chapter 4 provides an overview of the accounting model for gain contingencies that arise when recovery proceeds expected to be received are in excess of the related loss previously recognized in the financial statements.

The standard for recognition of gain contingencies is substantially higher than that for recognition of loss contingencies. ASC 450-30 indicates that a gain contingency should usually not be recognized before realization.

A gain contingency should not be recognized even if realization is considered probable. The notion of “probable” is relevant in accounting for a loss contingency, but it is not relevant in accounting for a gain contingency.