Contingent Asset


DEFINITION of 'Contingent Asset'

An asset in which the possibility of an economic benefit depends solely upon future events that can't be controlled by the company. Due to the uncertainty of the future events, these assets are not placed on the balance sheet. However, they can be found in the company's financial statement notes.

BREAKING DOWN 'Contingent Asset'

These assets, which are often simply rights to a future potential claim, are based on past events. An example might be a potential settlement from a lawsuit. The company does not have enough certainty to place the settlement value on the balance sheet, so it can only talk about the potential in the notes. This improves the accuracy of financial statements and removes potential abuses.

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  1. Does working capital include inventory?

    A company's working capital includes inventory, and increases in inventory make working capital increase. Working capital ... Read Full Answer >>
  2. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
  3. Are dividends considered an asset?

    Whether dividends paid on stock are considered an asset depends on which role you play in the investment: the issuing company ... Read Full Answer >>
  4. What is a profit and loss (P&L) statement and why do companies publish them?

    A profit and loss (P&L) statement, or balance sheet, is essentially a snapshot of a company's financial activity for ... Read Full Answer >>
  5. How do dividends affect the balance sheet?

    Dividends paid in cash affect a company's balance sheet by decreasing the company's cash account on the asset side and decreasing ... Read Full Answer >>
  6. Who actually declares a dividend?

    It is a company's board of directors who actually declares a dividend. The declaration date is the first of four important ... Read Full Answer >>

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