What is Contingent Liability and what is the disclosure requirement in Financial Statements?

A liability that is not currently a liability but may become one upon the happening of some future event.

Contingent liabilities should be disclosed in the notes to the Financial Statements.

A potential obligation that may be incurred depending on the outcome of a future event. A contingent liability is one where the outcome of an existing situation is uncertain, and this uncertainty will be resolved by a future event. A contingent liability is recorded in the books of accounts only if the contingency is probable and the amount of the liability can be estimated.

For example, a company may be facing a lawsuit from a rival firm for patent infringement. If the company's legal department thinks that the rival firm has a strong case, and the company estimates that the damages payable if the rival firm wins the case are $2 million, it would book a contingent liability of this amount on its balance sheet. If, on the other hand, the company's legal department is of the opinion that the lawsuit is frivolous and very unlikely to be won by the rival company, no contingent liability would be necessary.

Reference - Investopedia

Contingent liability is liability where outcome is uncertain

A contingent liability is a possible obligation that may or may not arise. Its existing will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events.

Disclosure:

IAS37 requires that such liabilities should be disclosed in the notes of the Financial Statements unless there is only a REMOTE (less than5%) possibility.

Contingent Liability is a liability that is not yet certain however there are chances of being payable in near future, Like a case pending in court against your company whose decision is uncertain.

Accounting Standard recommend disclosing the amount as a non posting one in the financial statement notes to the accounts section.