Which of the following statements about contingent liabilities is true?

The statement that contingent liabilities exist and are confirmed only by uncertain future events is accurate. Contingent liabilities are potential obligations that may arise based on the outcome of future events. This means that their recognition is dependent on whether a specific event occurs, such as the outcome of a lawsuit or the possibility of a warranty claim. Until these uncertain future events are resolved, contingent liabilities are not guaranteed to require settlement.

Contingent liabilities are important in financial reporting as they highlight the potential risks an organization faces, but they are not recorded in the financial statements unless it is probable that a liability has been incurred and the amount can be reasonably estimated. This aligns with the principles of accounting, where items are recognized based on certainty and reliability of measurement. Thus, this statement accurately reflects the nature of contingent liabilities.