Definition of Contingent asset:
An asset for which the growth potential is determined by future events entirely outside the companys control, and as such are not listed on its balance sheet, but are required to be stated in its financial statements.
A contingent asset becomes a realized asset recordable on 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.
A contingent asset is a potential economic benefit that is dependent on future events out of a company’s control. Not knowing for certain whether these gains will materialize, or being able to determine their precise economic value, means these assets cannot be recorded on the balance sheet. However, they can be reported in the accompanying notes of financial statements, provided that certain conditions are met. A contingent asset is also known as a potential asset.
How to use Contingent asset in a sentence?
- A contingent asset is a potential economic benefit that is dependent on future events out of a company’s control.
- Upon meeting certain conditions, contingent assets are reported in the accompanying notes of financial statements.
- They are recorded on the balance sheet only when the realization of cash flows associated with it becomes relatively certain.
Meaning of Contingent asset & Contingent asset Definition