Contingent liabilities are:

Question

Quizplus · Accepted Answer

Contingent liabilities are potential obligations that arise from past events and whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events, which are not wholly within the control of the entity. If it is probable that a liability will arise, and the amount of the liability can be reasonably estimated, then it should be recognized in the financial statements. However, if the possibility of an outflow in settlement is only remote or uncertain, then the contingencies should be disclosed in the notes to the financial statements. Therefore, the best choice is B, as contingent liabilities are only recognized in the notes to the financial statements unless the possibility of an outflow in settlement is remote.

Contingent Liabilities Are