RSM221H1 Chapter Notes - Chapter 13: Current Liability, Interest Bearing Note, Promissory Note
25 Sep 2016
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A liability is an obligation that arises from past transactions/events which may result in a transfer of assets or provision of services. They have 3 characters: they embody a duty or responsibility to others, entity has little to no discretion to avoid the duty, the transaction or event that obliges the entity has occurred. An obligation exists at the date of the bs. Can be enforced by legal or equivalent means. Constructive obligation arises when past or present company practice shows that the entity acknowledges a potential economic burden. The entity has indicated to others that it will accept a specific responsibility and other parties can reasonably expect the entity to meet its responsibility. If they violate the law, this results in liabilities. After acquisition most are accounted for at their amortized cost. When they are short term (30 days) they are accounted for at their maturity value.
