RSM219H1 Chapter Notes -Net Present Value, Contingent Liability, Current Liability
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RSM219H1 Full Course Notes
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11/04/2013 2:24:00 pm: liabilities represent the company"s obligations arising from past transactions or events. Represents a duty, responsibility, or obligation that imposes an economic burden. Enforcement; the entity has little or no discretion to avoid the obligation . The creditor has the right to pursue legal action. Valuation methods for liabilities: present value, gross amount of the obligation: the total amount of payments to be made; If the rental agreement can be cancelled at any time, the company is only obligated to pay the current amount. It ignores the time value of money since interest only accrues as an obligation as time passes, the only liability that exists is for the principal of the loan: net present value of the obligation. Recognizes the amount of the obligation in its net present value. As time passes, interest expense is recorded which recognizes the cost of the loan and increases the liability.
