A guarantee provided to a financier for a loan taken out by another entity,where default on that loan is uncertain as at the reporting date,is an example of a contingent liability.

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A contingent liability is a possible obligation that arises from past events but is not likely to be confirmed until the occurrence of one or more uncertain future events beyond the control of the entity. In this case, the guarantee provided may result in a liability if the borrower defaults on the loan, which makes it a contingent liability.

A Guarantee Provided to a Financier for a Loan Taken