Recall that a liability is defined as a probable future sacrifice of future economic benefits. The future sacrifice results from past transactions and events and, in the present moment, represent an obligation to pay cash, transfer assets, or provide services.
Probable: The confirming event (i.e., something that confirms there is an obligation) is likely to occur.
Reasonably possible: The chance that the confirming event will occur is more than remote but less than likely.
Remote: The chance the confirming event will occur is slight.
Is the amount known?
Is the amount reasonably estimable?
Is the amount not reasonable estimable?
GAAP says to estimate a range of potential outcomes.
If one amount within the range is more likely than others, use that amount.
If not, use the minimum amount from the range.