Question

Which of the following about contingent assets is not correct?

A. Contingent assets are possible assets as their present existence is unclear.
B. Contingent assets are based on the definition of an asset according to the Conceptual Framework.
C. Contingent assets are recognised in the statement of financial position and in the notes to the accounts.
D. Contingent assets are disclosed in the notes to the accounts where the flow of economic benefits is probable.

Answer 1

Contingent assets are potential assets that may arise from uncertain events. They are recognized in the notes to the financial statements when it is probable that the future economic benefits will flow to the entity.

Step-by-step explanation:

The correct answer is D. Contingent assets are not disclosed in the notes to the accounts where the flow of economic benefits is probable.

Contingent assets are potential assets that may arise from uncertain events, but their existence is not yet confirmed.

They are recognized in the notes to the financial statements when it is probable that the future economic benefits will flow to the entity.