Definition of contingent liability
Further reading
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.
Examples
- Outstanding lawsuits
- Legal liability
- Liquidated damages
- Tort
- Bills Discounted with bank
- Unliquidated damages
- Destruction by Flood
- Product warranty
- Income Tax Disputed
- Sales Tax Disputed
References:
- Wiktionary. Published under the Creative Commons Attribution/Share-Alike License.
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