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Question: You are considering buying a company. You are aware that
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You are considering buying a company. You are aware that

sometimes liabilities are not disclosed in the Enter question
Statement of
Financial Position. Required: Give five examples of liabilities
that may not be clearly stated in
the Statement of Financial
Position, then explain why they are liabilities.

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Manik Jain answered this

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1,725 answers

The contingent Liabilities are not disclosed in the Statement of

the Financial Position as

A contingent liability is a potential liability that may occur

in the future, such as pending lawsuits or
honoring product
warranties.

As the amount is not known for sure as to how much would be

involved, so they are not recorded in the
financial statements and
are included in the notes only.

Eg. Lawsuit, Foreign Exchange Fluctuations , Government policy

changes , Pending cases , product
warranty.

These liabilities do not have any fixed amount as to how much

there would be so that is why they are not
recorded in the
financial statements but they do have to be reported in the
footnotes so as to keep up with
the accounting standards.

Since, these liabilities are uncertain in nature that there is a

possibility that it might happen or could not be
there , but if the
situation arises where the chances of it happening is there, so it
needs to be recorded. My Textbook Solutions
Because of this nature only of their's they
are considered as contingent liability.

Please comment if you

need any clarifications.

Please Upvote.

Thanks.
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