WHAT IS CONTINGENT LIABILITY?- Obligation that may possibly ( take it as 50% likelihood of occurring ) arise from past events not fully controllable by the business.
- A present Obligation that may or may not occur that is why it is not be recognized as a liability.
- An unsure but potential liability.
WHY CONTINGENT LIABILITY IS NOT RECOGNIZED?- Business cannot determine any future monetary benefits.
- Not reliably information to categorize it as Contingent Liability.
SHOULD THE CONTINGENT LIABILITY DISCLOSED IN FINANCIAL STATEMENTS?- Yes, they should be disclosed as business sees any probability of it occuring.
SHOULD THE CONTINGENT LIABILITY DISCLOSED IN FINANCIAL STATEMENTS WHEN THE OUTCOME SEEMS NOT PROBABLE?- No, you should have guessed. And it's right. No need to disclose when business knows it won't happen in a million years ( business analysts and accountants seems sure ).
HOW CONTINGENT LIABILITY SHOULD BE DISCLOSED IN FINANCIAL STATEMENTS?- By writing notes in Financial Statements. It is not disclosed on the face of SFP - Statement of Financial Position
IF A COMPANY " A " SUES ANOTHER COMPANY " B " IS THE AMOUNT STILL TO BE INCURRED CONTINGENT LIABILITY ?- Yes, as Company " A " sees the probability of sue case taken up in the court or settling by meeting - Business sees some money exchange between parties. And if the company is found to be guilty then it's no more a Contingent Liability but a Current Liability.
Hopefully, these have cleared your concepts on Liability and mine too. Still have to appear for the paper. Do pray for me.
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[ REFERENCES ] wisegeek.com/what-is-a-contingent-liability.htmfinancial-dictionary.thefreedictionary.com/contingencyen.wikipedia.org/wiki/Contingent_Liabilitiesscotland.gov.uk/Topics/Government/Finance/spfm/contingentliabsblog.accountingcoach.com/contingent-liabilityinvestopedia.com/terms/c/contingentliability.aspcitefin.com/333-contingent-liability.htmlbusinessdictionary.com/definition/contingent-liability.htmlgeekinterview.com/question_details/22180{ GENERAL PURPOSE LINKS } [ Webmaster Tools ]
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