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Contingent Liability

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Home Startup Terms Glossary Contingent Liability

What is Contingent Liability?

Contingent liabilities are unknown future losses that a startup may incur. Startups must account for these potential events according to the probability of becoming a liability and the amount estimate accuracy. A contingent liability must be recorded on official financial statements for the startup to comply with Generally Accepted Accounting Principles (GAAP) .

Contingent Liability Examples

Examples of contingent liability considerations include:

  • Example 1. Discrimination lawsuits
  • Example 2. Product warranties
  • Example 3. Client insurance claims
  • Example 4. Creditor bankruptcy claims
  • Example 5. Breach of contract lawsuits

Learn about contingent liabilities by checking out this page .

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