Source for disclosure of contingent liabilities in the notes : selected government institutions

Abstract

Contingent liabilities have commonly been disclosed by public organisations in the notes to their financial statements, and in terms of a generally accepted accounting framework. However, the concept of contingent liabilities has not been widely discussed in the public sector accounting literature globally, and there remains a notable absence of discussion in South African literature in particular. This study attempts to report this gap in the literature by providing an analysis of archival annual reports. The research methodology employed in this paper is an archival research method, using the annual financial reports of government in South Africa. Disclosure notes of financial information are pertinent as they communicate to users the relevant financial data that is not ordinarily captured in the line items of financial statements. This study investigates the sources for disclosure of contingent liabilities in the notes, using selected government institutions. Hence, concerns for the disclosure relate to inaccurate information about the financial performance of the public organization. The paper reveals that the sources for the disclosure of contingencies still rest on the biased judgement of whether the outcome is remote and probable. This paper is intended to inform the general public and other users of government financial statements about losses which occur due to government accounting commitments oversights, and the reasonable measures which could have been put in place to prevent these and similar further such losses.