Reply To: Contingent Liabilities Due Diligence

#104449

Frederick Byrne
Participant

From an accounting perspective, when one is attemping to assess if a liability should be classed as a contingent liability. Rules specify that contingent liabilities should be recorded in the accounts when it is probable that the future event will occur and the amount of the liability can be reasonably estimated. With respect to court cases, independent legal advice can be sought as to the likelihood of a claim being awarded against a company, reviewing precedent cases, or asking a company to explain why they have created such a provision (if this is not adequately discussed in the notes to the financial statements).

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