Contingent assets and liabilities are assets and liabilities off the balance sheet that:
A)produce positive or negative future cash flows for an FI
B)can be used in contingency situations, that is, they serve as a fall-back position
C)potentially can produce positive or negative future cash flows for an FI
D)None of the listed options are correct.

Question

Quizplus · Accepted Answer

Contingent assets and liabilities have the potential to produce positive or negative future cash flows for an FI, but they are not certain. Examples of contingent assets include guarantees from third parties, while examples of contingent liabilities include warranties and lawsuits. These items are not recorded on the balance sheet but may need to be disclosed in the footnotes to the financial statements.

Contingent Assets and Liabilities Are Assets and Liabilities Off the Balance