Management and Organizational Studies 3361A/B Lecture Notes - Contract, Canada Pension Plan, Financial Statement

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MOS 3360: Chapter 13: Non- Financial and Current Liabilities
Liability present economic obligation for which the entity is the obligor
Liabilities have 3 Essential Characteristics:
1.) They exist at the present time
2.) They represent economic obligations
3.) Obligations are enforceable
Under ASPE and IFRS a financial liability is any liability that is a contractual
obligation to:
1.) Deliver cash or other assets to another entity OR
2.) Exchange financial assets or liabilities with another entity under conditions
that are potentially unfavorable to the entity
-Financial liabilities are recognized initially at their fair value.
-After acquisition they are accounted for at their amortized cost
-Transaction costs that are a direct result of the issue of the liability are netted
against its original fair value
Non- Financial Liabilities
-Are measured initially and at each subsequent dates at the best estimate of the
amount the entity would rationally pay at B/S date to settle obligation.
Current Liability
Under IFRS a current liability is:
-expected to be settled in the entity’s normal operating cycle
-held primarily for trading
-due within 12 months from the end of the reporting period
-entity doesn’t have unconditional right to defer its settlement for at least 12
months after B/S date
Examples of Current Liabilities: Bank Indebetedness, A/P, Notes Payable (Interest
bearing and non-interest bearing)
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