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What is contingent liability?
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Answer Posted / suresh
Contingent Liabilities are shown in Notes to Accounts or
under Explanatory items depending on where the BS is
prepared. In some western countries CL is shown under
Auditors report and as an explanation to a possible
liability payable in the next year or future years.
Mostly these are related to court law suits or patent
issues/drugs abuse cases etc.
Most of the CL are not given any value in the BS but a note
saying that a payment of $$$$ may fall due on a possible
liability of a law suite etc etc...
The liability that cannot be quantified correctly to the
final value....say a legal liability or a product warantee
but a possible payment that may arrise in future if not
covered fully under any insurance.
It's the responsibility of the Auditor and the
Finance/Accounts Dept to workout at the aprox value to be
shown in the notes to a/c as CL based on a rough estimate.
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