What best describes a contingent asset?

A contingent asset is defined as a potential asset that may arise from past events, the existence of which will only be confirmed by the occurrence of future events that are not entirely within the organization's control. This aligns precisely with the definition of option B, which highlights that while the asset is linked to past actions, its realization depends on uncertain future occurrences.

For example, if a company has a pending lawsuit that, if successful, could result in a financial gain, this situation illustrates a contingent asset—the outcome is uncertain until the legal process concludes.

The other choices do not accurately depict contingent assets. An asset with a definite cost established does not capture the inherently uncertain nature of a contingent asset; rather, it describes a regular asset. An asset guaranteed to generate income does not apply since contingent assets are not guaranteed and depend on future events. Finally, an asset recognized immediately in the financial statements contradicts the nature of contingent assets, which are typically not recognized until certain criteria are met regarding their likelihood of realization.