Liabilities

It is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.

 

• provisions

   

• liabilities

   

• contingent liability

   

• unearned revenue

It is an obligation derived from a contract (through explicit or implicit means), legislation or other operation of law.

 

• constructive obligation

   

• contingent liability

   

• legal obligation

   

• lawsuit

It is an obligation derived by an entity from its actions where by an established pattern of past practice, published policies or a sufficiently specific current statement, the entity has indicated to other parties that it will accept certain responsibilities, which created a valid expectation on the part of third party that it will discharge those responsibilities. 

 

• lawsuit

•  

  legal obligation

   

• contingent liability

   

   

• constructive obligation

It is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

 

• contingent liability

   

• constructive obligation

   

• legal obligation

   

• provision

These are liabilities with uncertain timing and/or amount.

 

• provision

   

• accrual

   

• warranties

   

• contingent liability

A provision shall be recognized when the following conditions are present:

I. an entity has a present obligation (legal or constructive) as a result of a past event.

II. it is possible that an outflow of resources embodying economic benefits will be required to settle the obligation.

III. a reliable estimate can be made of the amount of the obligation.

 

• II and III

   

• III

   

• I and III

   

• I and II

These liabilities are not recognized in the books though they are possible obligations, as it has to be confirmed whether the entity will incur an obligation that could lead to an outflow of resources.

 

• legal obligation

   

• contingent liability

   

• constructive obligation

   

• provision

Contingent liabilities are...

 

• not recognized

   

• credited to a liability account when recognized

   

• not disclosed

   

• debited to a liability account when paid

The amount recognized as a provision shall be the ______ for the expenditure required to settle the present obligation at the balance sheet date.

•  

  net realizable value

   

• best estimate

   

• historical cost

   

• fair value

Provisions are discounted, where the effect is material. The discount rate shall be a pre-tax rate that reflects the current market assessments of the __________ and the risks specific to the liability.

 

• time value of money

   

•  

  future value of money

   

• fair value

   

• discounted value