Contingent liability
Definition
An obligation whose existence or amount depends on a future uncertain event. Under IAS 37, a provision must be made when an outflow is probable and estimable. Understatement of contingent liabilities is a common method of hiding future obligations.
Related terms
- Capital expenditure (capex)
- Spending that provides an economic benefit over more than one period, capitalised as an asset on the balance sheet and expensed through...
- Cookie-jar reserve
- A liability or provision created in excess of its justified amount during a period of strong earnings, then released into income in...
- Off-balance-sheet financing
- Arrangements that provide funding or transfer risk without the resulting obligation appearing on the face of the balance sheet. Operating leases before...
- Operating expense (opex)
- Costs consumed in the current period, expensed in full through the income statement. Reclassifying opex as capex defers the income-statement impact across...
- Special-purpose entity (SPE)
- A legal vehicle created by a sponsoring company for a specific purpose, such as securitising assets or financing a project. Under certain...
Explained in
- Expense and Liability ManipulationAn obligation whose existence or amount depends on a future uncertain event. Under IAS 37, a provision must be made when an outflow is probable and estimable....