A contingent liability is a potential obligation that may arise depending on the outcome of a future event. A building containing asbestos represents a situation where a liability may be incurred if the asbestos must be removed due to safety regulations, public health concerns, or legal requirements.
Unlike realized losses (e.g., from asset sales or impairments), contingent liabilities depend on future events and uncertainty.
Relevant References:
FASAB SFFAS No. 5 – Accounting for Liabilities of the Federal Government
GASB Statement No. 62 – Codification of Accounting and Financial Reporting Guidance
GAO Red Book – Contingent Liabilities Examples
Answer: B. building with asbestos
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