Abstract

9.1 The financial crises of the 1990s highlighted the shortcomings of conventional accounting systems in capturing the full extent of financial exposures arising from traditional “off-balance-sheet” obligations, such as contingent liabilities, and from financial derivatives contracts. The discovery of the magnitude and role of these obligations in these crises reinforced the need to monitor them. This chapter focuses on contingent liabilities.1 Guidelines for monitoring financial derivatives positions were provided earlier in the Guide.

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