Contingent liabilities are liabilities that may or may not
be incurred by an entity depending on the outcome of a
future event such as a court case. These liabilities are
recorded in a company's accounts and shown in the balance
sheet when both probable and reasonably estimable. A
footnote to the balance sheet describes the nature and
extent of the contingent liabilities. The likelihood of
loss is described as probable, reasonably possible, or
remote. The ability to estimate a loss is described as
known, reasonably estimable, or not reasonably estimable.
A contingent liability is a liability which a company has
to show in balance sheet and if that liability doesnt occur
in thew future then the company need not pay. For example
the Guarantees extended are Contingent Liabilitys. it
should be shown in the Notes to Accounts under the B/S
These are the not real liability, future events can only
decide weather it is a really a liability or not, due to
their uncertainity.These liabilities are termed as
contingent liabilities.Example:Bill Discounting.
A contingent iability is a liability which may or may not
arise in the future depending on the happening or non
happening of an event.This contingent liability we not
consider in Balance sheet because may be some times it will
be happening or may not be happening.We will make a one
note for contingfent liabilities in audit file.
These are not the real liability, feature events can only
decide wheather it is a really a liability or not, due to
their uncertianity. these liabilities are turmed as
contigent liabilities. Example. Bill Discounting.
a) A possible obligation that arises from past events and
the existence of which will be confirmed only by the
occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the
enterprise; or
b)A present obligation that arises from past events but is
not recognised because:
(i)it is not probable that an outflow of resources
embodying economic benefits will be required to settle the
obligation; or
(ii) a reliable estimate of the amount of the
obligation cannot be made.
Possible obligation - an obligation is a possible
obligation if, based on the evidence available, its
existence at the balance sheet date is considered not
probable.
Present obligation - an obligation is a present obligation
if, based on the evidence available, its existence at the
balance sheet date is considered probable, i.e., more
likely than not.
contingent liability is a liability which may or may not
arise in the future.Actually it is not shown in the
balancesheet.It is shown in the notes on accounts or
explanatory notes.
