Contingent Liabilities: Issues and Practice; Aliona Cebotari; imf working Paper 08/245; October 1, 2008
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Contingent Liabilities Issues and Practice
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I. Introduction ........................................................................................................................... 3 II. Background .......................................................................................................................... 5 III. Mitigating Risks Associated with Contingent Liabilities ................................................... 7 A. Frameworks for Dealing with Risks from Contingent Liabilities.................................... 7 B. When to take on Contingent Liabilities?.......................................................................... 9 C. Strategies to Transfer Risk or Costs Related to Contingent Liabilities.......................... 14 D. Other Safeguards against Risks Related to Contingent Liabilities ................................ 19 IV. Managing Retained Risk from Contingent Liabilities...................................................... 26 A. Instruments for Managing Low Impact Liabilities ........................................................ 26 B. Instruments for Managing High Impact Liabilities........................................................ 29 V. Disclosing Contingent Liabilities ...................................................................................... 32 VI. Institutional Arrangements for Managing Contingent Liability Risks ............................. 41 VII. Conclusion....................................................................................................................... 47 References............................................................................................................................... 57 Tables 1. Contingency Funds to Meet Calls on Contingent Liabilities: Selected Examples ..............30 2. IPSAS: When to Recognize and Disclose Contingent Liabilities .......................................34 3. Accounting/Statistical Standards and Transparency Initiatives: What to Disclose .............35 4. Legislative Requirements to Disclose Fiscal Risks: Selected Country Examples...............38 5. Disclosing the Magnitude of Contingent Liabilities: Selected Country Examples .............42 A1. Summary of the Main Requirements for Recognition and Disclosures of Contingent Liabilities .................................................................................................................................53 Figures 1. Typical Infrastructure PPP Project Risks and Hypothetical Allocation …...…...…..…….. 14 A1. The Swedish Debt Office Simulation Model....................................................................56 Boxes 1. Market Failure and Terrorism Insurance …………………...………………… ………… …... …. …….. 11 2. When Are Guarantees Preferable to Other Forms of Support? ............................................... 12 3. Estimating the Expected Cost and Market Value of Guarantees …….... .... ..... ............................ …… 17 4. Institutional Arrangements for Managing PPP Risks ………………………………...…….……. . 47 A1. Accounting Standards and Standard Setters …………………………………...………… 49 Annexes I. Accounting/Statistical Standards and Contingent Liabilities ...............................................49 II. Measuring the Value of Contingent Liabilities ...................................................................54 |
