Recommendation Contingent Asset Example

There are three possibilities for the outcome of this economic event.

Contingent asset example. Similar to contingency assets contingency liabilities are not certain yet. A contingent asset arises as a result of an event that may have a certain probability of occurrence for example an entity may file a lawsuit against another company for breach of a contract. Even if it is probable that the plaintiff will win the case and receive a monetary award it cannot recognize the contingent asset until such time as the lawsuit has been settled.

Even if it is probable but not certain that Company A will win the lawsuit it. An example of such asset is a court case. ABC Ltd filed a legal suit against its supplier XYZ Ltd for compensation against damages on non-supply of contracted goods.

For example AASB 3 Business 1 Onerous contract is a defined term. There is a possibility of ABC Ltd winning the case as it has concrete evidences of contract violation by XYZ Ltd. A contingent asset is a potential economic benefit for.

If both conditions do not exist the contingency liabilities must record in the financial note. In these notes for contingent assets and liabilities we are going to discuss both of these topics so that students can have an idea about the chapter and can score good marks in the examinations. Contingent Assets Example.

An example of contingent assets if the University was taking legal action against a third party for breach of contract for 2m and where lawyers are confident of winning the case and receiving compensation from the third party. The 2m would be reported as a contingent asset by way of a note in. A company involved in a legal case with the sheer expectation to receive the compensation which has a contingent asset as the outcome of the case is not yet known and the amount is yet to be determined.

Example of Contingent Asset Example 1. But the existence of these benefits and control over them is confirmed by future events. Such an asset or economic.