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Finance: What is Contingent Liability? 4 Views


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Description:

What is Contingent Liability? Contingent liability refers to a possible liability in the future contingent upon some other event being the trigger. This would be an accounting detail that would be either footnoted or astericked. Some examples would be on a new product’s warranty, in which the number of repairs or defect returns is unknown at the time, or if there is a lawsuit decision pending that can impact financials.

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Transcript

00:00

Finance allah shmoop what is contingent liability All right you

00:08

know what a liability is right It's a debt it's

00:11

a promise you've made that you need to fulfill teo

00:14

pay someone and fulfilling it can be done with cash

00:18

or ah promise of delivering inventory or after you've sold

00:23

the home to the joneses An interesting family with oddly

00:26

large foreheads you know delivering good title to the home

00:31

to them right So you're fulfilling liability of producing your

00:35

home so what's a contingent liability Well think of it

00:38

is a call option or a put option on a

00:41

security A contingent liability is a derivative of some other

00:46

underlying being like another liability Well the most common contingent

00:51

liability would be a filed lawsuit that is more than

00:54

just an ambulance chasing securities lawyer hoping to get a

00:58

quick five hundred grand to go away google might be

01:01

willing to pay three billion dollars toe by ring That

01:04

wireless doorbell company started by some weirdo contingent upon ring

01:09

properly defending its lawsuit from honeywell which claims that they

01:14

own the patents on the process while the financial outcome

01:17

of that lawsuit is a contingent liability to the company

01:22

Ring and the outcome of the joneses moving into town

01:25

well is a worldwide dominance and the enslavement of all

01:28

human I mean that's what's at stake their people But 00:01:31.39 --> [endTime] not least they keep their front lawn looking nice

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