What are provisions, contingent liabilities, and contingent assets, and can you provide examples of each?

Question

Accepted Answer

Provisions, contingent liabilities, and contingent assets are financial terms related to potential future events.

Provisions are liabilities of uncertain timing or amount, such as warranty provisions or restructuring provisions.
Contingent liabilities are potential liabilities that may arise depending on the outcome of a future event, such as pending lawsuits or guarantees on loans.
Contingent assets are potential assets that may arise depending on the outcome of a future event, such as tax refunds or potential insurance claims.