Contingent liability

What is Contigent Liability?

A contingent liability is:

(a)a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or

(b)a present obligation that arises from past events but is not recognised because:
(i)it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or
(ii)the amount of the obligation cannot be measured with sufficient reliability.

Operating Lease Commitment (i.e. rent commitment)

When you sign an operating lease, you have a legal obligation to settle the lease payments when they fall due.

Lease commitment represent the unpaid future lease payment that you have possible obligation to pay when they fall due in the future.

Thus, lease commitment is a contigent liability.

抱歉 副戶 投錯了票！001 的答案才是正確的！

First, contingent liability is:

(a) a possible obligation that arises from past events and existence
will be confirmed only by the occurrence or non-occurrence of one or
more uncertain future events not wholly within the control of the entity; or

(b) a present obligation that arises from past events but is not recognised because:
(i) it is not probable that an outflow of resources embodying economic benefits will be
required to settle the obligation; or
(ii) the amount of the obligation cannot be measured with sufficient reliability.

Operating Lease Commitment (i.e. rent commitment)
When you sign an operating lease, you have a legal obligation to settle the lease payments when they fall due. Lease commitment represent the unpaid future lease payment that you have possible obligation to pay when they fall due in the future. Thus, lease commitment is a contigent liability.

A contingent liability may arise under the condition of an unrecognised present obligation or a possible obligation.



Unrecognised present obligation means there is a present
obligation but the company cannot recognise the obligation in
its financial statement because the given event does not fulfill
the second or third criteria mentioned above, or both, for the recognition of a provision. However lease commitment is not a contigent liability under the "present obligation" criteria because its timing and amount of future obligation are certain.


Possible obligation refers to the circumstances under which a
certain event has occurred but a present obligation has not yet
crystallised. Depending on the development of future events, a
present obligation may arise in the future. However lease commitment is not a contigent liability under the "possible obligation" criteria because it does not depends on whether a certain event to occur.

2012-02-22 09:35:26 補充：
cecimak1995 部分答問會轉用副... Is there any source of your opinion?