Contingent Asset

You hurt your ankle at a grocery store and take the store to court. You sue them for $10,000 and hospital bills. Even though you’re likely going to win that case…that money is contingent on the judge awarding it to you. In this case, the $10,000 is a contingent asset because it requires a future event to transpire in order for a gain to be realized.

Contingent assets aren’t recordable until that other event occurs. When companies list these assets on any documents, they typically list them with a conservative sum; the future event could not happen, or another event could impact the realized gain in the future.

However, auditors are not big fans of listing contingent assets on financial statements. It’s important that the company only do so if the event is highly probable, and to provide footnotes explaining what must occur for a realized gain to occur.