Contingent LiabilityPossibility of obligation arising from past events, which is not within the control of the enterprise, is known as contingent liabilities. The actual obligation arising\which might arise will be confirmed only on the happening or non-happening of some future uncertain event\events.
- Disclosure: As required by AS-29, a contingent liability should be disclosed in foot note of financial statement, unless the possibility of an outflow of resources is remote.
Example: An outstanding law suit.
- Possible obligation is always a contingent liability, whereas present obligation becomes a contingent liability if the recognition criteria of a provision are not satisfied
- Contingent liability is a possible obligation which arises from past events
- Contingent liability has no impact on profits for that period