Trade and Other Payables

Question 1

___ is a present obligation of the entity to transfer an economic resource as a result of past events

Answer 1

Liability

Question 2

Essential Characteristics of Liability

Answer 2

1. Obligation
2. Transfer of economic resource
3. Present Obligation as a result of past events

Question 3

● Current liabilities – are based on the following criteria:

Answer 3

✓ it is expected to be settled in the entity’s normal operating cycle;
✓ it is held primarily for the purpose of being traded;
✓ it is due to be settled within 12 months after balance sheet date;
✓ the entity does not have an unconditional right to defer settlement of the liability for at
least 12 months after balance sheet date.

Question 4

Non current Liabilities have a residual definition.

Examples:
1. Long term notes payable
2. Bonds Payable
3. Lease Liability
4. Deferred Tax Liability

Answer 4

Notes only

Question 5

Explain Refinancing Agreement for

Long Term debt falling due within one year

Answer the ff questions:

Refinanced completed:
Before reporting date?
After Reporting Date with discretion?
After Reporting Date without discretion?

Answer 5

General Rule:
A liabs whic is due to be settled whin 12 mos after the reporting period is classified as current, even if:

1. The original term was for a period longer than 12 months
2. An agreement to refinance or to resched payment on a long term basis is completed after the reporting period (usually 12/31) and before the FS are authorized for issue (usually 3/31 pag may pirma na ng BODs)

Before reporting date? - NC Liabs

After Reporting Date with discretion? - NC Liabs

After Reporting Date without discretion? - CL Liabs

Discretion means kung control nya yung pag extend or not

Question 6

Explain Liabs Payable on demand

Answer 6

If covenants are breached, the liability is matic demandable and classified as CURRENT

However, the libas is NON CURRENT if the lender provides the entity a grace period ending ATLEAST 12 MONTHS

Question 7

Presentation of Liabilities

Answer 7

1. Trade and Other Payables
2. Current Provisions
3. Short-term Borrowings
4. Current Portion of longterm debt
5. Current Tax Liabiliy
6. Non current portion of Longterm debt
7. Deferred Tax Liability