In contingent liability disclosure, if a contingent liability is probable but not estimable, what disclosure is required?

• A. Provide a note disclosure.
• B. Do nothing until estimable.
• C. Recognize as a liability now.
• D. Record as revenue.

Answer: (A)

When a contingent liability is probable but not estimable, you must disclose it in the notes to the financial statements. The reason is that you can’t measure the amount reliably to record a provision, but the possibility of an outflow is still important information for users. So you describe the nature of the contingency and state that the amount cannot be estimated (or provide the best possible range if available). This approach satisfies transparency requirements without overstating liabilities. Not disclosing would hide a potentially material obligation, while recognizing a liability or recording revenue would misstate the financials.