Question

What are some examples of contingencies that don't involve liabilities?

Answer 1

Examples of contingencies that don't involve liabilities are as follows :

1. Possibility of gain to ABC Company from a lawsuit for patent infringement against another company EFG. The lawsuit filed by ABC is a contingent asset.

2. An infrastructural company ABC authorised to construct a domestic airport, filling a cost overrun litigation against the Airport Authority of the State for reimbursement of cost overrun incurred by ABC on account of delay in handing over the land by Authority to ABC for construction of the domestic Airport.

Once this litigation is awarded to the ABC by the Airport Authority, this will become an Asset which will be recognized in the Balance Sheet of Company ABC.