contingent liability


Also found in: Medical, Legal, Wikipedia.

Contingent Liability

A liability that a company may have to pay, but only if a certain future event occurs. Usually, a contingent liability refers to the outcome of a lawsuit: that is, the company may have to pay a significant amount of money if it loses the lawsuit. Contingent liabilities are recorded under accounts payable; their existence may also affect the share price.

contingent liability

An obligation that may result, but is not likely to result because the event causing the obligation is improbable. For example, the award from a lawsuit against a firm is a contingent liability of the defendant if there is little likelihood the plaintiff will recover the award.

contingent liability

a liability which may or may not occur depending upon an uncertain event, for example, the outcome of a court case in which damages are being claimed against a firm.

contingent liability

A liability that is not currently a liability but may become one upon the happening of some future event.If a father guarantees the student housing lease of his son,then the son is liable for the rent but the father may become liable if the son defaults. Other common contingent liabilities are guarantees of the debts of others,potential adverse judgments in litigation,and currently contested tax liabilities or audits. Lenders sometimes request a list of all contingent liabilities when evaluating a borrower's financial strength.

References in periodicals archive ?
A regime of contingent liability is therefore unique in the sense that it requires shareholders to compensate depositors for losses out of their personal wealth if the remaining assets of the bank are insufficient to cover liabilities.
Special mention should be made of the contingent liability transaction initiative, which provides taxpayers with a variety of approaches to settlement, ranging from acceptance of the IRS offer, to use of the Appeals process to determine what, if any, liability exists, to use of arbitration to settle the dispute.
358(h), by contrast, would reduce the basis of the stock received by the transferor by the present value of the contingent liability assumed, effectively eliminating the loss on the subsequent stock sale.
In the annual report, Company X recognizes a contingent liability of $5 million and explains the matter in a related footnote disclosure.
Somewhat offsetting the county's contingent liability for WCHCC is the county's willingness to raise recurring revenue.
BDHMI assumed a $560 million contingent liability for health care claims; its resulting value was $1 million ($561 million less $560 million).
These rules generally use a "closed transaction" approach and force the seller to account for the contingent liability or adjust basis to determine the gain it realizes as of the transaction's effective date.
is $100, then the $100 contingent liability may, if both parties agree, be treated as any other liability assumed on the sale of the assets.
Failure to properly consider the tax impact era contingent liability could have a negative effect on the purchase era business.
5, when determining if a contingent liability should be shown on a client's balance sheet.
Credit concerns include a high fixed-cost burden and the contingent liability for the Westchester County Health Care Corporation (WCHCC, or the medical center), whose financial position is quite weak.
A contingent liability is one that depends on an uncertain event, such as the settlement of a lawsuit.