ACTG 3120 Chapter Notes - Chapter 12: Canada Pension Plan, Current Liability, Financial Statement

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A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow of economic benefits. An expected future sacrifice of assets or services. Is the result of a past transaction or event. Liability due to a pattern of past practice or established policy: liabilities that arise from contract or legislation are called legal obligations for example trade payable or borrowings. There are 2 types of liabilities: financial liability. A financial instrument - a contract that gives rise to a financial liability of one party and a financial asset of another party: 2 categories within this class include: Items which are not classified as fvtpl are recorded here. Initial value: fv (transaction value) + transaction costs. Measured at cost (amortized cost) every reporting period. Fvtpl: classified if: liability will not be sold in the short term, designated fvtpl by management to avoid an accounting mismatch.

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