Final answer:
A contingent liability recorded on the balance sheet indicates that the obligation is probable. The accounting standards require probable obligations to be recognized in financial statements, as opposed to just possible or remote, which typically require only footnote disclosure.
Step-by-step explanation:
When discussing contingent liabilities, they are recognized in financial statements depending on the likelihood of the obligation occurring. The possible conditions for disclosure according to accounting standards are: probable, possible, and remote. If a contingent liability is recorded on the balance sheet and disclosed in the footnotes, it indicates that the potential for the obligation to occur is considered probable. This means that a future event is likely to occur, and as a result, the company must account for it in its financial statements.
Options A, Given ('certain'), and C ('probable') can be confusing, but it's important to note that a 'certain' obligation would no longer be contingent but actual. The correct choice is C, meaning the event is probable and the company believes the obligation is likely to be incurred. If the potential for the obligation was either 'possible' or 'remote', this would generally only require footnote disclosure rather than recognition on the Balance Sheet.