The Government will either apply a cash accounting (where liabilities are accounted for once they crystallize) or accrual accounting (where liabilities are accounted once they accrue). Cash accounting will not show the contingent liability unless a contingency fund is created, as discussed below.
Even if accrual accounting is not used, Governments can still use the reporting of such liabilities (creating better transparency) to create the necessary accountability of policymakers and help to manage the relevant contingent liabilities. This has been successfully implemented in a number of countries, for example the Czech Republic and South Africa.36
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36 Irwin, Government Guarantees: Allocation and Valuing Risk in Privately Financed Infrastructure Projects (World Bank 2007).