Contingencies

Question 1

What is a Contingent Liability

Answer 1

A possible debt from past transcations whose existence will be confirmed ONLY from occurence/non-occurence of uncertain feature events

Question 2

Characteristics of Contingent Liability

Answer 2

• It is PROBABLE
• the amount of debt can be reliably and reasonably estimated
• If it meets these criteras it is required in the BS and IS
• If it only meets one it is included in the Notes to financial statements (name of contingency, uncertain factors, estimate of financial effects)

Question 3

What is Contingent Assets

Answer 3

A possible asset arising from past transactions & whose existence will be confirmed ONLY by the occurrence/non occurrence.

Question 4

Characteristics of Contingent Asset

Answer 4

It is NOT recognized in Financial Statements
It is only disclosed in the Notes to FS if PROBABLE