Question

How should growing concerns over environmental damage influence how companies recognize and report contingent liabilities? Why?

Answer 1

For better understanding first of all let’s know something about contingent liabilities. Contingent liabilities refer to those which depend on the occurrence of some future events. In other words we can say that occurrence of some future events will decide about the status of liabilities.

As we know that now a days growing concerns over environment damages will influence recognisition and reporting of contigent liabilities. We have already discussed about contingent liabilities so more & more growing concerns over environment damages will create overburden of contingent liabilities on the balance sheet because more concerns means creation of more & more contigent liabilities on the balance sheet.

Thus it is clear that if a company or a firm is more concern over environment damages then that company & firm will make provision for every types of possible contingent liabilities due to possible environment damages. Hence it is clear that growing concerns over environment damages will influence recognisition and reporting of contigent liabilities.