what is a contingent asset course hero

In simple words, A Contingent asset is the potential economic benefit that may arise to a company or enterprise based on an occurrence of uncertain future events. The Company does not have any control over the occurrence of such future events. It is a possible gain to an Enterprise whose occurrence depends on an uncertain future event.

Full Answer

What is contingent asset?

A Contingent asset is the potential economic benefit which may arise to a company or enterprise based on an occurrence of uncertain future events.

How are contingent assets recognized and disclosed in financial statements?

Contingent assets are not recognized and disclosed in financial statement unlike contingent liability which is disclosed in a financial statement by way of notes to account. It is generally disclosed in the director’s statement.

What is contingent liability and how is it reported?

In similar ways, Contingent Liability is the potential liability that may arise to an enterprise based on an occurrence of uncertain future events not in control of the Company/Enterprise. Contingent Liability is reported in the company’s annual report by way of notes to accounts or specific sections dedicated to Contingent Liability.

Is patent infringement a contingent asset for an enterprise?

Historically patent infringement lawsuits are quite common in some industries such as Pharma, Technology, etc. In this case, the lawsuit for patent infringement by an enterprise is Contingent Asset for the Enterprise. However, it is a Contingent Liability for the Company at receiving the end of the lawsuit/responder to lawsuit.

Which is a contingent assets?

A contingent asset is a potential economic benefit that is dependent on some future event(s) largely out of a company's control. A contingent asset is thus also known as a potential asset.

What is contingent asset in simple words?

In simple words, A Contingent asset is the potential economic benefit that may arise to a company or enterprise based on an occurrence of uncertain future events.

What is a contingent asset and what is a contingent liability?

IAS 37 Provisions, Contingent Liabilities and Contingent Assets outlines the accounting for provisions (liabilities of uncertain timing or amount), together with contingent assets (possible assets) and contingent liabilities (possible obligations and present obligations that are not probable or not reliably measurable) ...

What is contingent in accounting?

A contingency arises when there is a situation for which the outcome is uncertain, and which should be resolved in the future, possibly creating a loss. The accounting for a contingency is essentially to recognize only those losses that are probable and for which a loss amount can be reasonably estimated.

What is a contingent asset quizlet?

-Contingent assets. -Possible asset arising from a past event whose existence will be confirmed by the occurrence/non-occurrence of one or more uncertain future events not within the control of the entity.

Where are contingent assets on balance sheet?

A contingent liability is recorded as an 'expense' in the Profit & Loss Account and then on the liabilities side of the financial statement, that is the Balance sheet.

Where are contingent assets disclosed?

A contingent asset is not disclosed in the financial statements. It is usually disclosed in the report of the approving authority (Board of Directors in the case of a company, and, the corresponding approving authority in the case of any other enterprise), where an inflow of economic benefits is probable.

What is contingent liability example?

Description: A contingent liability is a liability or a potential loss that may occur in the future depending on the outcome of a specific event. Potential lawsuits, product warranties, and pending investigation are some examples of contingent liability.

Can contingent assets be accrued?

Contingent assets are economic resources or benefits which gets are not readily realisable or accrued but gets accrued on a future date on the occurrence of an uncertain event.

What is contingent asset?

Contingent asset is a possible asset of the company that may arise in the future on the basis of happening or non happening of any contingent event which is beyond the control of the company and will be recorded in the balance only if it becomes certain that the economic benefit will flow to the company. In simple words, A Contingent asset is the ...

What is the accounting standard for contingent assets?

Accounting treatment of Contingent Assets, Contingent Liabilities, and Provisions are governed by International Accounting Standard 37 (IAS 37), which is a part of IFRS adopted by the International Accounting Standard Board.

What is audit report?

Audited Report An audit report is a document prepared by an external auditor at the end of the auditing process that consolidates all of his findings and observations about a company's financial statements. read more. unless there is a certainty for reimbursement of cost overrun amount from the Authority.

When are contingent assets not recognized?

According to IAS 37, Contingent assets are not recognized, but they are disclosed when it is more likely than not that an inflow of benefits will occur. However, when the inflow of benefits is virtually certain, an asset is recognized in the statement of financial position. Statement Of Financial Position Statement of Financial Position represents ...

Is patent infringement a contingent asset?

In this case, the lawsuit for patent infringement by an enterprise is Contingent Asset for the Enterprise. However, it is a Contingent Liability for the Company at receiving the end of the lawsuit/responder to lawsuit.

Is contingent liability included in the company's annual report?

Contingent Liability is reported in the company’s annual report by way of notes to accounts or specific sections dedicated to Contingent Liability. However, Contingent Asset does not form part of the Company’s Annual Report unless it becomes certain.

Can the Authority hand over land to Developer?

Since the Authority could not hand over the required land to Developer for the development of the Project as per schedules in the contract leading to an increase in overall project cost, Developer files litigation against the Authority for reimbursement of incremental cost incurred by the Developer.