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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
Full Transcript
- 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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