There is substantial modification of a liability if the difference between the present value of the new liability discounted at the original effective interest rate and the carrying amount of the old liability is a. at least 10% b. more than 10% c. less than 10% d. none of these

There is substantial modification of a liability if the difference between the present value of the new liability discounted at the original effective interest rate and the carrying amount of the old liability is a. at least 10% b. more than 10% c. less than 10% d. none of these

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Contingent Liabilities and Provisions

A contingent liability can be defined as a liability the occurrence of which is dependent upon the happening of an uncertain future event. It is generally recorded in the books only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly.

Question

15. There is substantial modification of a liability if the difference between the present value of the new liability discounted at the original effective interest rate and the carrying amount of the old liability is

a. at least 10%

b. more than 10%

c. less than 10%

d. none of these

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