Contingent Liability - F2

Question 1

What is a contingent liability?

Answer 1

A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

Question 2

Why is a contingent liability not recognised?

Answer 2

1. It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation
2. The amount of the obligation cannot be measured with sufficient reliability

Question 3

Is a contingent liability recognised?

Answer 3

Contingent liability is not recognised and disclosed in a note, unless the possibility of outflow is remote.