Let us examine some examples.
A typical example is the accounting of warranty. When we sell a product, we have to give warranty. Since we cannot charge warranty fees from the customers, we charge it indirectly while the product is sold. The entry is
When the settlement actually happens
lawsuit liability xxxxx
The uniqueness of contingent liabilities is that they don't have an opposite called contingent asset. Yes, there are certain short lived asset additions made which goes into gain section in the income statement like the following entry
Gain on appreciation of securities. xxx
This is done when an investment in security is declared as a dividend; the security in question is revalued to its fair market value. But the nature of Investment-Securities is short term. This account gets removed from the balance sheet once the said dividend is paid.
We do not create a revenue by dreaming that we will gain/win an income, creating a contingent asset.
Lawsuit receivable 100000000
Lawsuit win revenue 100000000
As you can see this is as absurd as it seems.