Indirect liability

An indirect liability is a potential obligation that may arise under certain circumstances. An indirect liability exists in the following situations:

  • The entity is a secondary obligor on a liability, where another party is the primary obligor. The entity will only be liable if the primary obligor fails in its payment obligation.
  • An event may occur in the future that will trigger an obligation, such as an unfavorable outcome to a lawsuit.

Related Courses

Accountants' Guidebook 
GAAP Guidebook