Question

Why are contingent liabilities considered unique and different from all other liabilities?

A. Whether or not a company has an obligation depends on the result of a future event.

B. Whether or not a company has an obligation depends on the result of a past event.

C. The company knows the amount of the obligation.

D. Both B and C are unique to contingent liabilities.

Answer 1

Contingent liabilities are unique because they depend on the result of a future event.

Step-by-step explanation:

A. Whether or not a company has an obligation depends on the result of a future event.

Contingent liabilities are considered unique and different from all other liabilities because they are dependent on the occurrence or non-occurrence of a future event. This means that a company may or may not have an obligation depending on what happens in the future.

For example, a company may be involved in a lawsuit, and the outcome of the lawsuit will determine whether or not the company has a liability. If the company loses the lawsuit, it will have a contingent liability.

Therefore, the correct answer is A. Whether or not a company has an obligation depends on the result of a future event.