A company must disclose contingent liabilities if:

A company is required to disclose contingent liabilities when the obligation is probable and requires future payment. This is based on the accounting principles that dictate how liabilities should be recognized and reported. A contingent liability is a potential obligation that may arise depending on the outcome of a future event, such as a lawsuit or warranty claim.

When the likelihood of the obligation becoming actual is assessed as probable, it indicates that a future cash outflow is more likely than not to occur. This assessment not only calls for recognition of the liability in the financial statements if the amount can also be reasonably estimated, but it also requires proper disclosure to inform stakeholders of potential risks and obligations that the company may face.

Simply stating that a liability is unlikely to result in a future cash outflow, or that it is confirmed by external auditors does not meet the criteria for disclosure. Disclosure is not based on the favorability of outcomes either; rather, it hinges specifically on the probability of the obligation and potential future financial implications if the obligation materializes. Therefore, the correct circumstances under which a company must disclose a contingent liability is when the obligation is assessed as probable, along with the requirement for a future payment.