Liabilities

Question 1

Characteristics of a liability

Answer 1

Present obligation
Transfer of economic resource
Arises from past event

Question 2

Types of present obligation

Answer 2

Legal

Constructive

Question 3

Measurement of current liability

Answer 3

Face amount (not discounted)

Question 4

Measurement of noncurrent liability

Answer 4

Initial - present value

Subsequent - amortized

Question 5

Classification of a current liability

Answer 5

Expected to be settled within the entity’s operating cycle
Held primarily for trading
Due to be settles within 12 months after the reporting period
Does not have the right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period