It stands for more likely than not; in accounting, this expression “more likely than not” sets a threshold (more than 50% likelihood) for a certain item (e.g., an expense or benefit) to be recognized or treated in a specific way. It also denotes the likelihood exceeding 50% that an event is likely to happen.
For example, a tax benefit is assessed by an entity’s management in view of the recognition threshold (that it is likely than not, the tax benefit would arise). The threshold would be considered met if it can be concluded that a certain level of tax benefit in a given year in which the transaction occurred meets the more-likely-not recognition threshold. In which case, the uncertainty engulfing the transaction’s valuation is addressed as part of measurement.
The “more likely than not” threshold replaced the earlier used “realistic possibility” for financial reporting under generally accepted accounting principles (GAAP).
