Contingent assets

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Financial accounting.

Contingent assets are defined as possible assets that arise from past events and whose existence will be confirmed only by the occurrence of one or more uncertain events not wholly within the reporting entity’s control.

The generally accepted accounting treatment for contingent assets is that a contingent asset should not be recognised, because it could result in the recognition of profit that may never be realised.

Where the inflow of economic benefits is probable the entity should disclose a brief description of the contingent asset and an indication of its financial effect.

If there is only the possibility of an asset arising no mention at all should be made in the accounts.

Relevant accounting standards include Section 21 of FRS 102 and IAS 37.

See also