it should not be recognised but it should be disclosed .
A contingent liability is a possible obligation arising from past events, the outcome of
which will be confirmed only on the occurrence or nonoccurrence of one or more uncertain future
events
par
Muhammad Afaq , SENIOR FINANCIAL ACCOUNTANT , United Eddy Company (United Yousef M. Naghi Group)
A contingent liability (or Loss) is one that can occur at some certain point in the future once various related uncertainties resolved. It is disclosed as part of notes which are the integral parts of the financial statements. It is disclosed in the following two forms:1. A liability is recognized when it is probable; means loss can be estimated2. A liability which occurrence is reasonable possible in near future not in remote.
Exception: If this liability is related to remote, we do not record it.
Examples: outcomes of a lawsuits, government investigation etc.
par
Ali Iftikhar , Assitant Manager Finance , National Logistics Cell
A contingent liability is a possible obligation arising from past events, the outcome of
which will be confirmed only on the occurrence or nonoccurrence of one or more uncertain future
events.
A contingent liability is also a present obligation that is not recognized, either because it is not probable that an outflow of resources will be required to settle an obligation or the amount of the obligation cannot be measured with sufficient reliability.
A contingent liablility in financial statements is treated as follows:
If a probable out flow and reliable estimate can be made then an Expense is chaged and a liablity is booked along with disclosure notes including the following;
An estimate of its financial effect, an indication of the uncertainties relating to the amount or timing of any outflow, and the possibility of any reimbursement.
Contingent liability is a potential obligation that may be incurred depending on the outcome of a future event. A contingent liability is one where the outcome of an existing situation is uncertain, and this uncertainty will be resolved by a future event. A contingent liability is recorded in the books of accounts only if the contingency is probable and the amount of the liability can be estimated.
