Contingent Liabilities
A contingent liability is a potential obligation that may arise depending on the outcome of a future event. It is not recorded as an actual liability on the balance sheet but is disclosed as a contingency in the financial statements. This is done because the liability's occurrence is uncertain. Under both GAAP and IFRS accounting standards, if the possibility of the liability becoming actual is probable, and its amount can be reasonably estimated, it must be disclosed. If the likelihood is remote, no disclosure is required.
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