Contingent liabilities refer to potential obligations that may arise in the future depending on the outcome of uncertain events. These liabilities are not yet certain and may or may not require an outflow of resources or settlement.

Explanation:
Contingent liabilities are different from recognized liabilities and provisions. While recognized liabilities and provisions are obligations that are already certain and measurable, contingent liabilities are potential obligations that may or may not materialize in the future.

In the case of contingent liabilities, there are two possible scenarios:

1. Outflow of resources is not probable: In this scenario, the possibility of the contingent liability becoming an actual liability is considered remote. It means that it is unlikely that the company will have to pay anything to settle the obligation. As a result, no provision is recognized for such contingent liabilities.

2. Amount cannot be measured with sufficient reliability: In this scenario, even though the contingent liability is considered probable, the amount that would be required to settle the obligation cannot be reliably measured. This means that there is uncertainty regarding the potential financial impact of the liability. In such cases, no provision is recognized until the amount can be measured with sufficient reliability.

Contingent liabilities are disclosed in the financial statements as footnotes or in a separate section to provide information to the users of the financial statements about potential future obligations that may impact the company's financial position.

It is important to note that the non-recognition of contingent liabilities does not mean that the company is absolved of its responsibility. If the contingent liability materializes in the future, it may need to be recognized as a liability and provisions may need to be made accordingly.

In conclusion, in the case of contingent liabilities, if the outflow of resources to settle the obligation is not probable or the amount cannot be measured with sufficient reliability, no provision is recognized. Contingent liabilities are disclosed in the financial statements to provide information about potential future obligations.