Overview

contingent liability


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A liability which will only arise in certain specific circumstances. For example, a guarantee of somebody else's debts will have to be honoured only if they fail to pay up. Insurance companies incur contingent liabilities when they issue fire or accident insurance policies: they will have to pay out only if policy-holders suffer fires or accidents. Contingent liabilities create problems for accountants in valuing businesses, particularly with contingencies whose likelihood is difficult to assess.

Subjects: Business and Management — Economics.


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