Which of the following statements regarding liabilities is true? Liabilities arise through a contractual obligation. The entity often has reasonable discretion to avoid the obligation Liabilities may be attributable to a future transaction or event. O The duty or responsibility obligates the entity
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- For a liability to be recognised within the financial statements, it needs to be reasonably apparent that an obligation to an ____________exists. Select one alternative: legal obligation external party another party counter partyIn accordance with AASB 9, the recognition of a financial asset or financial liability will be influenced by considerations as to whether there is a contractual right to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable, or potentially unfavourable, to the entity. Explain what this requirement means.Pursuant to the conceptual framework, for an item to be characterised as a liability the definition of liabilities must be applicable to the transaction or event, and the recognition criteria should also be satisfied. Applying the definition of liabilities, there are three key components in the definition of ‘liability’, these being:1. There must be an expected future disposition of economic benefits to other entities.2. There must be a present obligation.3. A past transaction or other event must have created the obligation.Required:Take any two examples of liabilities and test if they meet all three requirements.
- An obligation that is contingent on the occurrence of a future event should be reported in the statement of financial position as a liability if: a. The amount of the obligation can be reasonably estimated. b. The future event is likely to occur. c. The occurrence of the future event is at least reasonably possible and the amount is known d. The occurrence of the future event is probable and the amount can be reasonably estimated.In explaining the meaning of obligation in the definition of a liability, the Conceptual Framework states: A. That an obligation is a duty or responsibility that an entity has no practical ability to avoid B. Than an obligation can arise from a duty or responsibility conditional on a future action that the entity itself may take, if the entity has no practical ability to avoid taking that action C. That an obligation can arise from an entity's customary practices, published policies or specific statements, if the entity has no practical ability to avoid those practices, policies or statements D. All of the aboveWhat is/are the rule/rules (and the exceptions, if there be any) in case an object is lost or damaged due to fortuitous event, particularly as to the liability of the debtor in an obligation. Give specific examples for your answers.
- Which of the following is not a criterion that must be met for an item to be classified as a liability? A certain cash payment will occur in the future. A sacrifice will require the entity’s assets or services. There is a probable future sacrifice. There is a present obligation that results from a past transaction.Define contingent liability. What is the criteria to determine whether or not to report the contingency on financial statements? What supporting documentation is required? Please provide a detailed example of a contingent liability.Short-term obligations are reported as noncurrent if the entity has a discretion to refinance it as long-term. True False
- What is/are the rule/rules (and the exceptions, if there be any) in case an object is lost or damaged due to fortuitous event, particularly as to the liability of the debtor in an obligation.Which of the following is correct about contingent liabilities and provisions? The terms are interchangeable. A provision is based on an estimate while a contingent liability can be estimated reliably. A provision is disclosed in the statement of financial position while a contingent liability is disclosed in the notes. A contingent liability does not need to be disclosed in an entity's annual report.1. Which of the following is an essential characteristic for an obligation to qualify as a liability? a. The obligation should have a definite amount at the report date. b. The party to whom payment will be made should be especially identifiable at report date c. The obligation should be settled in cash. d. The obligation should arise from past transactions of the enterprise e. All of the choices 2. Which of these is not a current liability? a. Serial maturity of long-term obligations b. Payables in providing services to be offered for sale c. Accruals for salaries and wages d. Contractual obligations falling due at an early date which is expected to be refunded e. none of the choices 3. An estimated liability is an obligation that is uncertain as to: a. NO - amount; NO - existence b. YES - amount; NO - existence c. NO - amount; YES - existence d. YES - amount; YES - existence
