Contingent liability

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