The Effect of Contingent Liabilities in the Economic Value of the Entity

Abstract

The preparation of Financial Statements must reflect the activity of the Economic Entity . the influential activity elements are liabilities that happen as a result of that activity, which is of great importance in the quality of Financial Reporting and its impact on the economic value of the Entity, as they face some problems in the reporting of contingent liabilities that could pose a burden the future. As a result, investors often turn to financial statements for the purpose of knowledge of the financial position and the offer of financial information on the nature of the contingent liabilities and its ability to predict the possibility of the recognition, measurement and reporting of these contingent liabilities. It was concluded that the reporting of contingent liabilities is not the image that reflects the reliability and credibility of the financial statements and that the lack of local standards will help the accounting staff to clarify the foundations of the recognition, measurement and disclosure of contingent liabilities contributes to the weakness reported, and as a result, the financial reporting of contingent liabilities is necessary to influence the decisions of investors, which are reflected on the stock's performance in the financial markets .