Which condition must be met for a contingent asset to be disclosed?

A contingent asset is defined as a potential asset that may arise from future events, and it is linked to an uncertain situation. For disclosure, it is crucial that the inflow of economic benefits is probable. This means that there is a more than likely chance that the asset will be realized, often grounded in an event likely to occur in the future, such as a favorable legal decision or a guarantee to receive additional funds.

When the inflow of economic benefits is probable, it suggests that the company can reasonably expect to benefit economically from the asset, which warrants disclosure to inform stakeholders about potential future financial performance. This disclosure helps in providing a full and fair view of the company's financial position without prematurely recognizing an asset that has not been realized.

In contrast, if the expectation is merely uncertain or possible, that would not meet the threshold needed for disclosure, as doing so might mislead users of the financial statements about the company's actual financial health. Other choices do not capture the essence of what makes a contingent asset worthy of disclosure in accounting practices, such as requiring complete recognition or reliable estimates that do not pertain directly to the probability of benefit inflow.