What Are Contingent Assets - Definition - Meaning - Explanation - Example

Contingent Assets are depended upon the happening of a probable future economic benefits that are not under the control of the business. The company can not account for (Recognize) such Assets in its financial statements. Contingent assets will become Current Assets or Fixed Assets / Non Current Assets when it is sure that it will become the economic benefits of the company and its amount can be estimated reasonably.

For Example, if the company wins the case for the acquisition a property, then after wining the case, the company can record this building as a Fixed Assets. The entity can not record such building as a Fixed Asset on its financial statements unless it is sure that the company will win the case i.e. when the judge announces the case in favour of company.

Contingent Assets are not recognized on Balance Sheet, but the company provides financial information about it in Notes to the Accounts.

However, when these are realized, then these are either become Current Assets or Non Current Assets. If these are used within one year or less, then these are known as Current Assets but if these are used for more than one year, then these are called Non Current Assets or Fixed Assets.