What Are Contingent Liabilities - Definition - Meaning - Explanation - Example
Contingent Liabilities are those Liabilities that arise on the happening of future uncertain event that will arise or not. The International Financial Reporting Standards clearly says that the entity shall recog n ize such uncertain event as Contingent Liability i n N otes to the Accounts whether it will no sure that it will be happen or not. However, if there is no chance of occurring that liability i.e., there is very low probability, then the entity should not record that liability in its financial statements. In fact, the standard requires from the business a safe way according to anticipate loss but not for profit concept. If we do not follow this rule, then our Net Profit will be overstated which will be n ot a good sig n for the business if the profit will not happen. On the other hand, if the loss will not happen, then it will cost to us as we already accounted for it. The example of Contingent Liability is the Legal Case. When, it is not clear wheth...