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Keywords: Mazars, Thailand, Accounting, Contingent asset
18 August 2021
As a result, contingent assets can be defined as follows:
As noted above, a contingent asset becomes a realized asset recordable in the balance sheet when the realization of cash flows associated with it becomes relatively certain. In this case, the asset is recognized in the period when the change in status occurs.
Contingent assets may arise due to the economic value being unknown. Alternatively, they might occur due to uncertainty relating to the outcome of an event where an asset may be created. A contingent asset appears because of previous events, but the entirety of all asset information will not be collected until future events happen.
There also exist contingent or potential liabilities. Unlike contingent assets, they refer to a potential loss that may be incurred, depending on how a certain future event unfolds.
Examples of Contingent Assets
As seen in the three examples above, the outcome of the cases has not been determined. The potential economic benefit depends on future events out of a company’s control. As a result, the company cannot recognize the contingent asset in its financial statements until the outcome has been determined. However, the company needs to disclose potential assets in its notes to the financial statements.
Reference: TFAC
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