What is the treatment of contingent liabilities in the financial statements?
A) Contingent liabilities are to be recognised as a separate category in the statement of financial position, with a clear note disclosure of the factors that constitute the contingent event for each material contingent liability.
B) Contingent liabilities are required to be disclosed in the notes to the financial statement when the amount of the obligation cannot be measured with sufficient reliability.
C) Material contingent liabilities only are required to be recognised in the financial statements under AASB 137.
D) Contingent liabilities are to be disclosed in the notes to the accounts in categories that reflect their nature and possible timing.

Question

Quizplus · Accepted Answer

Contingent liabilities are only required to be disclosed in the notes to the financial statement when the amount of the obligation cannot be measured with sufficient reliability. They are not recognised as a separate category in the statement of financial position unless the likelihood of an outflow of resources to settle the obligation is probable, and a reliable estimate of the amount can be made. AASB 137 requires disclosure of the nature, and where practicable, an estimate of the financial effect of significant contingent liabilities. Therefore, option B is the best choice.

What Is the Treatment of Contingent Liabilities in the Financial