Contingent Liabilities: Issues and Practice; Aliona Cebotari; imf working Paper 08/245; October 1, 2008

Disclosure Requirements 
The disclosure of contingent liabilities based on contractual obligations is already 
required or recommended under internationally accepted accounting and statistical 
standards. In particular, under accrual accounting, the International Public Sector 

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Accounting Standards (IPSAS) require the disclosure of contractual contingent liabilities 
(such as guarantees and legal claims) in the notes to financial statements as long as the 
possibility of the payment is not remote (see Table 2 for when disclosure is required and 
Table 3 for what should be disclosed). Under cash accounting standards, no disclosure is 
currently required, but supplementary disclosure in line with that under accrual standards is 
recommended by the cash basis IPSAS. Under statistical reporting standards, such as GFSM 
2001, the disclosure of aggregate data on all important contingent liabilities is required as a 
memorandum item to the balance sheet. 
Table 2. IPSAS: When to Recognize and Disclose Contingent 
Liabilities
1
Loss can be measured
Record in financial statements 
and disclose nature of 
contingency
Disclose nature of 
contingency and amount
No 
Disclosure
Loss cannot be 
reasonably measured
Disclose nature of contingency
Disclose nature of 
contingency
No 
Disclosure
Likelihood and 
measurability of loss
Loss more likely than not
(probability > 50%)
Loss less than likely but 
more than remote
Loss remote
1
Contingent liabilities here correspond to their general definition used in the paper, not to their 
accounting definition.