Textbook Notes (367,906)
Canada (161,487)
MGAC02H3 (21)
Daga (10)
Chapter 13

Chapter 13 Notes

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Department
Financial Accounting
Course
MGAC02H3
Professor
Daga
Semester
Fall

Description
Chapter 13 NonFinancial and Current Liabilities NotesRecognition and MeasurementLiability Definition and Characteristicsy liabilities have three essential characteristics1 they exist at the present time 2 they represent economic burdens or obligations and 3 the obligations are enforceable on the obligor entity y some unconditional obligations are referred to as standready obligations y this means that the obligor stands ready to do whatever is required under the terms of a contract agreement or law y a conditional obligation requires performance to be carried out only if an uncertain future event actually occurs Financial Liabilities and NonFinancial Liabilities y under both ASPE and FIRS a financial liability is any liability that is contractual obligation 1 to deliver cash or other financial assets to another entity or 2 to exchange financial assets or liabilities with another entity under conditions that are potentially unfavourable to the entity y the distinction between financial and nonfinancial liabilities is important because the accounting standard that applies depends on how the liability is classifiedMeasurementFinancial Liabilities y after acquisition though most of the financial liabilities are accounted for at their amortized cost y transaction costs that are a direct result of the issue of the liability are netted against its original fair value y alternatively transaction costs associated with the issue of financial liabilities that are accounted for after acquisition at fair value are recognized in net income as they are incurred NonFinancial Liabilities y ASPE does not separately address the issue of nonfinancial liabilities so they are measured in variety of ways depending on liability y under international standards nonfinancial liabilities are measured initially and at each subsequent reporting date at the best estimate of the amount the entity would rationally pay at the balance sheet date to settle the present obligation NonFinancial LiabilitiesDecommissioning and Restoration Obligationsy in general the obligation associated with the retirement of a longlived asset that results from acquiring constructing developing or operating it must be recognized by the company in the period when the obligation is incurred this liability is known as an asset retirement obligation ARO or site restoration obligationIFRS Private Enterprise Standards Category of Recognizes costs of both legal and constructive Recognizes costs associated with legal obligations only obligations obligations such as when an entity creates an expectation in others through its own actions that it will meet this obligation Category of Costs included as capital assets are onl
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