What is Contingent Liabilities

There are liabilities that may or may not be incurred by an entity depending on the outcome of a future event such as a court case. These liabilities are recorded in a company’s accounts and shown in the balance sheet when both probable and reasonable estimable. A footnote to the balance sheet describes the nature and extent of the contingent liabilities. The likelihood of loss is described as probable, reasonably possible or remote. The ability to estimate a loss is described as known reasonably estimable or not reasonably estimable.