Top Notch Contingent Asset Example

Example of Contingent Asset An example of a contingent asset and its related contingent gain is a lawsuit filed by Company A against a competitor for infringing on Company As patent.

Contingent asset example. ABC Ltd filed a legal suit against its supplier XYZ Ltd for compensation against damages on non-supply of contracted goods. Although these estimates are based on managements best knowledge of current events and actions actual results may ultimately differ from those. Has filed a lawsuit against Company B Ltd.

A contingent asset is a potential economic benefit that is dependent on future events out of a companys control. Example of a Contingent Asset The best example of both sides of a contingent asset and contingent liability is a lawsuit. Or if the company is anticipating a merger.

Sometimes the provision may form part of the cost of the asset. If the contingency is probable and the related amount can be estimated with a reasonable level of accuracy. Included in the cost of inventories or an obligation for environmental cleanup when a new mine is opened or an offshore oil rig is installed.

The 2m would be reported as a contingent asset by way of. Even if it is probable that the plaintiff will win the case and receive a monetary award it cannot recognize the contingent asset until such time as the lawsuit has been settled. A contingent asset arises as a result of an event that may have a certain probability of occurrence for example an entity may file a lawsuit against another company for breach of a contract.

Contingent Assets Example A company involved in a legal case with the sheer expectation to receive the compensation which has a contingent asset as the outcome of the case is not yet known and the amount is yet to be determined. The most common example of a contingent liability is a product warranty. Other examples include guarantees on debts liquidated damages outstanding lawsuits.

Contingent asset is a possible asset of the company that may arise in the future on the basis of happening or non happening of any contingent event which is beyond the control of the company and will be recorded in the balance only if it becomes certain that the economic benefit will flow to the company. It is a potential asset but there is no surety. For example if the company is locked in a legal dispute and has the possibility of winning the case and being entitled to a claim or damages.