Perfect 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. The most common example of a contingent liability is a product warranty. 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. Such an asset or economic interest arises from an uncertain and unpredictable event.

An example of such asset is a court case. Contingent assets are those assets which may or may not become a reality for a business depending on the outcome of a future event. 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.

There is a possibility of ABC Ltd winning the case as it has concrete evidences of contract violation by XYZ Ltd. Of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the financial year. Or if the company is anticipating a merger.

It is a potential asset but there is no surety. 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. ABC Ltd filed a legal suit against its supplier XYZ Ltd for compensation against damages on non-supply of contracted goods.

Examples of Contingent Assets Example 1. There are three possibilities for the outcome of this economic event. Contingent liabilities are possible obligations whose existence will be confirmed by uncertain future events that are not wholly within the control of the entity.

For infringing a patent case. 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. Other examples include guarantees on debts liquidated damages outstanding lawsuits.