Contingent Liabilities
Explain the term Contingent Liabilities?
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Contingent liabilities are such liabilities that are not liabilities as of at present.
In future they might become liabilities. They are termed as contingent since they are not real.
Illustration: A bank exhibits all bank guarantees which has issued as contingent liabilities in its balance sheet. Reason is that those bank guarantees might be invoked and might really become liability in some unidentified date in the future.
Contingent liabilities are illustrated in annual report and balance sheet. There is a solid reason for similar. Assume any contingent liability becomes an actual liability in future then the stake holders in the company must not acquire surprised by unexpected expense by the company.
Investors require to be informed of probable liabilities in the future.
The following information is taken from the financial statements of an entity: 20x4 20x3 Property, plant and equipment $4,600,000 $4,200,000 Accumulated depreciation (1,800,000) (1,350,000) Depreciation expense 560,000 Gain on disposal of PPE 65,000 The asset disposed of had a cost
Liability Management: The procedure by which financial institutions balance outstanding liabilities, like deposits, CDs, and so on, with suitable liquidity reserves. Banks and other lenders employ liability management to decrease liquidity risks and u
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