In accordance with AASB 137 "Provisions,Contingent Liabilities and Contingent Assets",which of the following is considered a contingent liability?
A) Guarantee provided by the parent entity on behalf of a solvent subsidiary.
B) Settlement of a legal case where the company is likely to be held liable for damages in court.
C) Best estimate of likely claims for warranty by customers.
D) Guarantee of an associate's bank overdraft where the associate has declared bankruptcy.
E) None of the given answers.

Question

Quizplus · Accepted Answer

A contingent liability is 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. A guarantee provided by the parent entity on behalf of a solvent subsidiary fits this definition as it is dependent on future events.

In Accordance with AASB 137 "Provisions,Contingent Liabilities and Contingent Assets",which