Contingency

Examples of Contingency in the following topics:

• The Contingency Viewpoint

  • The contingency viewpoint of management proposes that there is no standard for management; instead, management depends on the situation.
  • Instead, the optimal course of action is contingent or dependent upon the specific internal and external situation management may find itself in.
  • Debating which one of the previous approaches to management is the "best" approach is irrelevant in contingency theory, since the heart of the contingency approach is that there is no "one best way" for managing and leading an organization.
  • By its nature, contingency theory avoids static rules.
  • An example of the contingency viewpoint in action is a manager facing a situation with an employee who regularly shows up late to work.

• Reporting Contingencies

  • Contingencies are reported as liabilities if it is probable they will incur a loss, and their amounts can be reasonably estimated.
  • A loss contingency is less than 50% likely to occur due to a past obligation.
  • Gain contingencies are reported on the income statement when they are realized (earned).
  • A probable loss contingency can be measured reliably if it can be estimated based on historical information.
  • Conservative accounting principles state that companies should report loss contingencies as they occur.

• Gain Contingencies

  • Gain contingencies, or possible occurrences of a gain on a claim or obligation involving the entity, are reported when realized (earned).
  • The disclosure of gain contingencies is affected by the materiality concept and the conservatism constraint.
  • Thus, for a gain contingency, only a realized gain is accrued for and disclosed on the income statement.
  • A material gain contingency that is both probable and reasonably estimated can be disclosed in the notes to financial statements.
  • Explain how a company reports a gain contingency on their financial statements

• Loss Contingencies

  • A loss contingency may be incurred by the entity based on the outcome of a future event, such as litigation.
  • A loss contingency is incurred by the entity based on the outcome of a future event, such as litigation.
  • Loss contingencies can refer to contingent liabilities that may arise from discounted notes receivable, income tax disputes, or penalties that may be assessed because of some past action or failure of another party to pay a debt that a company has guaranteed.
  • Unlike gain contingencies, losses are reported immediately as long as they are probable and reasonably estimated.
  • Summarize how a company would report a loss contingency on their financial statements

• Cross Tabulation

  • Cross tabulation (or crosstabs for short) is a statistical process that summarizes categorical data to create a contingency table.
  • Cross tabulation (or crosstabs for short) is a statistical process that summarizes categorical data to create a contingency table.
  • For example, combines multiple contingency tables and tables of averages.
  • Probability can be expressed easily from the contingency table by the relative frequencies.
  • If there is no contingency, we say that the two variables are independent.

• Four Theories of Leadership

  • Theories of effective leadership include the trait, contingency, behavioral, and full-range theories.
  • Experts have proposed several theories, including the trait, behavioral, contingency, and full-range models of leadership.
  • According to this approach, called contingency theory, no single psychological profile or set of enduring traits links directly to effective leadership.
  • In other words, contingency theory proposes that effective leadership is contingent on factors independent of an individual leader.
  • Fiedler's contingency model of leadership focuses on the interaction of leadership style and the situation (later called situational control).

• Randomization for two-way tables and chi-square

  • Randomization methods may also be used for the contingency tables.
  • In short, we create a randomized contingency table, then compute a chi-square test statistic.

• Practice 2: Contingency Tables

  • The student will conduct a test for independence using contingency tables.
  • Copy the data provided in Probability Topics Practice 1: Contingency Tables into the table below.

• Comparing Two Populations: Paired Difference Experiment

  • McNemar's test is applied to $2 \times 2$ contingency tables with matched pairs of subjects to determine whether the row and column marginal frequencies are equal.
  • It is applied to $2 \times 2$ contingency tables with a dichotomous trait, with matched pairs of subjects, to determine whether the row and column marginal frequencies are equal ("marginal homogeneity").
  • A contingency table used in McNemar's test tabulates the outcomes of two tests on a sample of $n$ subjects, as follows:
  • A contingency table used in McNemar's test tabulates the outcomes of two tests on a sample of $n$ subjects.

• Student Learning Outcomes