Contingent Assets

Assets which come into existence upon happening or not happening of certain event are called contingent assets.

A contingent asset could be a potential asset related to a contingent gain. in contrast to contingent liabilities and contingent losses, contingent assets and contingent gains aren't recorded in accounts, even after they are probable and therefore the amount may be estimated.

An example of a contingent gain and contingent asset may well be a suit filed by Company A against Company B for infringement of Company A’s patent. If it's probable that Company A can win the suit and receive an estimated quantity of cash, it's a contingent asset and a contingent gain. However, it'll not report the asset and gain till the suit is settled. (At most Company A can prepare a awfully fastidiously worded disclosure stating that it probably may win the case.) On the opposite hand, Company B can ought to create associate degree entry in its accounts if the loss contingency is probable and therefore the amount may be calculable. If one in all those square measure missing, Company B can need to disclose the loss contingency within the notes to its monetary statements.