Definition of Contingent Liability

Contingent Liability

An obligation that is dependent on the occurrence or nonoccurrence of
one or more future events to confirm the existence of an obligation, the amount owed, the payee,
or the date payable.

Contingent pension liability

Under ERISA, the firm is liable to the plan participants for up to 39% of the net
worth of the firm.

Asset/liability management

Also called surplus management, the task of managing funds of a financial
institution to accomplish the two goals of a financial institution:
1) to earn an adequate return on funds invested, and
2) to maintain a comfortable surplus of assets beyond liabilities.

Contingent claim

A claim that can be made only if one or more specified outcomes occur.

Contingent deferred sales charge (CDSC)

The formal name for the load of a back-end load fund.

Contingent immunization

An arrangement in which the money manager pursues an active bond portfolio
strategy until an adverse investment experience drives the then-available potential return down to the safetynet
level. When that point is reached, the money manager is obligated to pursue an immunization strategy to
lock in the safety-net level return.

Liability

A financial obligation, or the cash outlay that must be made at a specific time to satisfy the
contractual terms of such an obligation.

Liability funding strategies

Investment strategies that select assets so that cash flows will equal or exceed
the client's obligations.

Liability swap

An interest rate swap used to alter the cash flow characteristics of an institution's liabilities so
as to provide a better match with its assets.

Limited liability

Limitation of possible loss to what has already been invested.

Limited-liability instrument

A security, such as a call option, in which the owner can only lose his initial
investment.

Limited-liability instrument

A security, such as a call option, in which the owner can only lose his initial investment.

Unlimited liability

Full liability for the debt and other obligations of a legal entity. The general partners of a
partnership have unlimited liability.

contingent pay

compensation that is dependent on the
achievement of some performance objective

limited liability company

an organizational form that is a hybrid of the corporate and partnership organizational
forms and used to limit the personal liability of the owners;
it is typically used by small professional (such as accounting) firms

limited liability partnership

an organizational form that is a hybrid of the corporate and partnership organizational
forms and used to limit the personal liability of the owners;
it is typically used by large professional (such as accounting) firms

Current liability

This is typically the accounts payable, short-term notes payable, and
accrued expense accounts on the balance sheet, or any other liabilities that are
expected to be liquidated within a short time interval.

Liability

A dollar amount of obligation payable to another entity.

limited liability

The owners of the corporation are not personally responsible for its obligations.

Deferred Tax Liability

Future tax obligation that results from the origination of a temporary
difference that causes pretax book income to exceed taxable income.

Liability

A probable future sacrifice of economic benefits arising from present obligations of
a particular entity to transfer assets or provide services to other entities in the future as a result of
past transactions or events.

Contingent Beneficiary

This is the person designated to receive the death benefit of a life insurance policy if the primary beneficiary dies before the life insured. This is a consideration when husband and wife make each other the beneficiary of their coverage. Should they both die in the same car accident or plane crash, the death benefits would go to each others estate and creditor claims could be made against them. Particularly if minor children could be survivors, then a trustee contingent beneficiary should be named.

Contingent Owner

This is the person designated to become the new owner of a life insurance policy if the original owner dies before the life insured.

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