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    Question

    A contingent liability should be disclosed

    when:
    A Possibility of outflow of resources is remote Correct Answer Incorrect Answer
    B Outflow of resources is probable and amount can be measured reliably (should be provided, not disclosed) Correct Answer Incorrect Answer
    C Outflow is possible but not probable Correct Answer Incorrect Answer
    D It is certain and amount known Correct Answer Incorrect Answer

    Solution

    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.

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