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A company is involved in a lawsuit for which the contingent liability is remote. How should the liability be treated on the balance sheet

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bharathparasad577

A company is involved in a lawsuit for which the contingent liability is remote. The liability should be treated on the balance sheet as unrecorded and undisclosed.

On the balance sheet, the liability should be treated in a manner that is unrecorded and undisclosed:

  • The balance sheet stands for a financial statement that communicates the book value of a particular organization.
  • Contingent liabilities rely upon the outcome of an unlikely event.
  • These contingent obligations become liabilities in the future.
  • If the contingent liability happens to be remote, then it must not be reflected in the balance sheet.
  • The liability should be treated on the balance sheet as unrecorded and undisclosed.

Therefore, if a company is involved in a lawsuit for which the contingent liability is remote then the liability should be treated on the balance sheet as undeclared and undisclosed.

Learn more about liabilities here:

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