Glossary

Contingent liability

A contingent liability is a possible future obligation that depends on something uncertain happening — like a legal claim or a guarantee being called — disclosed in the accounts even when it isn't yet a firm debt.

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Possible obligationDepends on a future event

DisclosedNoted even if not booked

Definition

A contingent liability is a potential obligation whose existence depends on the outcome of a future event, such as pending litigation or a guarantee that might be called. It's disclosed in the notes to the accounts, and recognised as a liability only if it becomes probable and measurable.

In plain terms

It's a 'maybe' debt — something that will only cost you if a particular thing happens. Readers of your accounts still need to know it's lurking.

Why it matters for your company

Personal and cross-company guarantees are classic contingent liabilities — a reason to prefer Credicorp's no-personal-guarantee lending. See personal guarantees.