Contingent liability is not recorded in the financial statement of the organisation but it should be disclosed in financial statement, unless the possibility of an outflow of resource embodying economic benefit is remote.

In some cases an enterprise is jointly and severally liable for an obligation. In such case, the part of the obligation that is expected to be met by other parties is treated as contingent liability.

Contingent liabilities are continuously assessed and if it becomes probable that an outflow of future economic benefit will be required to settle obligation which is previously assessed as contingent liabilities, a provision is recognized.

An enterprise should disclose for each class of contingent liability at the balance sheet date:

• A brief description of the nature of the contingent liability, where practicable.
• An estimate of the amount as per measurement principle.
• Indication of the uncertainty relating to outflow.
• The possibility of any reimbursement.