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Contingent Liability

A potential liability that may occur, depending on the outcome of a future event.

Business Glossary provided by
Contingent liabilities are not definite obligations. They depend on the occurrence of a specific event in the future, such as lawsuits, warranty claims, or tax disputes. These liabilities are recorded in the company’s accounts only if the liability is probable and the amount can be reasonably estimated. They are disclosed in the notes to the financial statements to inform investors about the potential risks that may affect the financial health of the company.
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