A contingent asset refers to a potential asset that may arise in the future, depending on the occurrence or non-occurrence of certain events. It is not recognized as an asset in the financial statements until the occurrence of the event is confirmed. The recognition and measurement of contingent assets are governed by accounting standards and regulations.
A contingent asset is a potential asset that may arise from past events, but its existence is uncertain and depends on future events.
Examples of contingent assets include pending lawsuits, insurance claims, and potential tax refunds.
Contingent assets are disclosed in the notes to the financial statements, and their potential value is estimated.
Contingent assets cannot be recognized as assets on the balance sheet unless their existence is virtually certain.
A contingent asset is a potential asset that may arise from past events, while a contingent liability is a potential obligation that may arise from past events.
No, a contingent asset cannot be used to offset a contingent liability unless both are virtually certain.
A contingent asset can be sold or transferred, but the buyer assumes the risk that the asset may not materialize.
If a contingent asset does not materialize, it is written off as a loss in the financial statements.
A contingent asset cannot be used as collateral for a loan unless its existence is virtually certain.
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This glossary post was last updated: 5th April 2024.
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