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IFRS 37 Contingent liability and defining examples

Explain how IFRS defines a contingent liability and provide an example.

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IFRS 37 defines a contingent liability as (exact quote):

"... liabilities of uncertain timing or amount. A provision should be recognised when, and only when:
(a) an entity has a present obligation (legal or constructive) as a result of a
past event;
(b) it is probable (ie more likely than not) that an outflow of resources
embodying economic benefits will be required to settle the obligation;
(c) a reliable estimate can be made of the amount of the obligation.
The Standard notes that it is only in extremely rare cases that a reliable
estimate will not be possible. (IFRS 37, para IN2)

"In rare cases, for example in ...

Solution Summary

Your discussion is 445 words and includes the exact wording from IFRS 37. Two examples are given, one that is accrued and one that is disclosed only.