Answer-A contingent liability should be disclosed when:

A contingent liability is disclosed in the notes to the financial statements when an outflow of resources is not probable but is possible. If it is probable, a provision is recognized.

Question

A contingent liability should be disclosed

when:

A Possibility of outflow of resources is remote

B Outflow of resources is probable and amount can be measured reliably (should be provided, not disclosed)

C Outflow is possible but not probable

D It is certain and amount known

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A contingent liability should be disclosed

Solution