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9 December, 12:50

A contingent liability:

a. is only remotely possible.

b. cannot be estimated.

c. will result from a future event.

d. is a potential liability that has arisen because of a past event or transaction.

e. will only result when a remote event becomes probable.

f. is remotely estimable and probable.

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  1. 9 December, 14:34
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    d. is a potential liability that has arisen because of a past event or transaction.

    Explanation:

    A contingent liability refers to an obligation which arises owing to past events or transactions, whose happening is improbable i. e it may or may not arise in the near future.

    If the effect of such a liability can be reasonably estimated, then these should be provided for as a footnote in the financial statements.

    An example of a contingent liability would be a legal suit filed against the company, if lost would lead to an obligation for damages which the company may have to pay.
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