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In the context of contingent liabilities, what does reasonably estimated mean? Also give an example.

In the context of contingent liabilities, what does reasonably estimated mean? Also give an example.

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In the context of contingent liabilities, REASONABLY ESTIMATED means that the value of contingent liability should be estimated in monetary terms which could be recorded and expressed in financial statements . Mere recognizing the probability of contingent liability does not work, it should be expressed in terms of value. Same should have a valid estimated figure, since contingent liabilities occurrence depends on outcome of uncertain future event.

For eg---- Company's legal department estimates regarding the pending lawsuit that it could potentially give a loss of 1million dollar to company and chances of losing are 90% , then company should recognize the same as potential liability. Legal department has reasonably estimated the contingent liability.

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