Final answer:
Under IFRS, no action is taken on contingent liabilities when the likelihood of the event occurring is remote. Contingent liabilities are not recognized on the balance sheet or disclosed in notes unless there is a greater chance that a future event will confirm the obligation.
Step-by-step explanation:
In the context of International Financial Reporting Standards (IFRS), no action is taken on contingent liabilities when the likelihood of the event occurring is remote. This means that a business would not recognize a contingent liability on its balance sheet or disclose it in the notes to the financial statements if the possibility of the future event occurring and leading to a financial loss is considered to be remote.
Contingent liabilities are potential obligations that arise from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company. The accounting treatment for contingent liabilities depends on the likelihood of the occurrence of the event and the ability to estimate the potential financial impact.
To summarize the options provided: A. When the likelihood is remote; B. Immediately upon identification; C. When it may impact future financial statements; D. Only when legally required. The correct answer is A. When the likelihood is remote. In such cases, IFRS guidelines suggest that recognition of these potential liabilities is not necessary.