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
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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 party
Step by step
Solved in 2 steps
- 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.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.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 above
- 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.1. Which of the following is not an essential characteristic of a liability? * a. It is a present obligation that entails settlement by probable future transfer or use of cash, goods or services. b. The liability must be an unavoidable obligation. c. The transaction or other event creating the obligation must have already occurred. d. The obligation must be settled to an identifiable party.Which condition is necessary for the recognition of a liability? A. It is probable that an outflow of economic benefits will be required to settle an obligation B. The amount of the obligation can be measured reliably C. The amount of the obligation must be definite D. It is probable that an outflow of economic benefits will be required to settle an obligation and the amount of obligation can be measured reliably.
- 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.What is the relationship between provisions, onerouscontracts, contingent liabilities and other types ofliabilities?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. Give specific examples for your answers.
- Determine when a liability can be classified as a noncurrent obligation.A provision should be recognized when: O a. Present obligation from a past event, outflow that will be required to settle, and Reliable estimate can be made. O b. There is contingency. O C. Estimate is made and there is evidence readily available. O d. After the event has been follow through and there is a liability present.To be recorded as a liability, does the obligation have to be absolute?