Question

Which of the following about the disclosure of contingent assets and liabilities is not correct?

A. An estimate of the financial effect of a contingent asset should be disclosed.
B. Contingent liabilities require recognition in the statement of financial position and disclosure in the notes.
C. Disclosure of contingent liabilities is required unless the possibility of an outflow of resources is remote.
D. A description of the nature of the contingent asset at the end of the reporting period should be disclosed.

Answer 1

The correct statement is that an estimate of the financial effect of a contingent asset should be disclosed.

Step-by-step explanation:

The correct answer is A. An estimate of the financial effect of a contingent asset should be disclosed.

The disclosure of contingent assets and liabilities is an important aspect of financial reporting. A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future events. When disclosure of a contingent asset is made, the financial effect of the asset should be estimated and included in the financial statements.

However, it is not required to disclose the nature of the contingent asset at the end of the reporting period.