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    Question

    In the case of_____, either outflow of resources to

    settle the obligation is not probable or the amount expected to be paid to settle the liability cannot be measured with sufficient reliability
    A Liability Correct Answer Incorrect Answer
    B Provision Correct Answer Incorrect Answer
    C Reserves Correct Answer Incorrect Answer
    D Contingent liabilities Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Contingent liabilities are potential obligations that may arise from past events and their existence is uncertain, depending on the occurrence or non-occurrence of one or more future events not within the control of the entity. When the outflow of resources to settle the obligation is not probable, or the amount cannot be measured with sufficient reliability, the entity recognizes a disclosure in its financial statements in the form of a note or footnote. This disclosure informs the users of the financial statements about the potential liability and the possible impact on the entity's financial position and performance.

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