MAA261 Lecture Notes - Lecture 7: Contingent Liability, Current Liability, Australian Taxation Office
Document Summary
Lia(cid:271)ilities = a prese(cid:374)t o(cid:271)ligatio(cid:374) of the e(cid:374)tit(cid:455) arisi(cid:374)g fro(cid:373) past e(cid:448)e(cid:374)ts, the settle(cid:373)e(cid:374)t of (cid:449)hi(cid:272)h is expected to result in an outflow from the entity of resources embodying economic benefits. Must have future outflow of resources embodying economic benefits. Recognition is recording the liability in the formal accounts of the entity and disclosing in financial statements. Recognition avoids the understatement of liabilities and the overstatement of equity. Criteria for recognition: probable that future economic benefit will flow out from the entity, on demand, on a specified date, on the occurrence of a specified event cost or value can be measured, may require estimates/discounting. Explain the nature of provisions and contingent liabilities. Nature of provisions: provision is a liability but the amount of timing of the outflow of economic benefits is uncertain. Accumulated depreciation and allowance for doubtful debts are not provisions for a liability.
