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Liabilities: Includes Fees and Commission Paid Not Included Debt Premiums or Discounts

Liabilities arise from past transactions or events and require an outflow of resources. They must be identified and settled through cash payment, asset transfer, or service provision in the future. Common examples include accounts payable, wages payable, taxes payable, debt obligations, and unearned revenue. Liabilities are initially measured at fair value minus transaction costs and subsequently at amortized cost. Current liabilities are due within one year or the normal operating cycle, while non-current liabilities are amounts due after one year.

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Catherine Joy Morales
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39 views2 pages

Liabilities: Includes Fees and Commission Paid Not Included Debt Premiums or Discounts

Liabilities arise from past transactions or events and require an outflow of resources. They must be identified and settled through cash payment, asset transfer, or service provision in the future. Common examples include accounts payable, wages payable, taxes payable, debt obligations, and unearned revenue. Liabilities are initially measured at fair value minus transaction costs and subsequently at amortized cost. Current liabilities are due within one year or the normal operating cycle, while non-current liabilities are amounts due after one year.

Uploaded by

Catherine Joy Morales
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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LIABILITIES

 sent obligation of a particular entity


-it must be identified
 Arise from past events or transactions
-liability is not recognized until it is incurred
 Settlement of liability requires an outflow of resources embodying economic benefit

*the obligation must pay in cash, transfer noncash asset or provide service at some future time.

Example of liability
 Accounts payable to supplier
 Amount withheld from employees
 Accruals for wages, interest, royalties, taxes, product warranties and profit sharing plans
 Dividends (not stock dividends) declare but not paid
 Deposit and advance from customer
 Debt obligation- mortgage, note, and bonds payable
 Income tax payable (tax must be paid by gov within 1 year)
 Unearned revenue (amount review in advance)

Measurement
*initial –fair value minus transaction cost
*transaction cost- expensed immediately id it is designated to profit or loss
Includes; fees and commission paid
; levies by regulatory agencies and securities exchange
Not included; debt premiums or discounts
; financing cost (cost and interest and other charge)
; internal administrative or holding cost
*subsequent –amortized cost (effective interest method)
-fair value through profit or loss

Classification of CURRENT LIABILITY


a. Expect to sell the liability within normal operating cycle
b. Holds liability for the purpose of trading
c. Due to be settled within 12 months after reporting period
d. Does not have the right to defer settlement for at least 12 months

Example;
 Held for trading  Unsecured bonds payable
 Bank overdrafts  Premium bonds payable
 Dividends payable  Discount on bonds payable (less)
 Income tax Working capital
 Nontrade payable  Trade payable
 Current portion of nuncurrent payable  Accruals (accrued payable/expense)
 Customer’s deposit  Other operating cost

*current even if settled more than 12 months or after reporting period.


Measurement of CURRENT LIABILITY
 Initial –present value
 Subsequent- amortized cost
*short-term obligation are not discounted but measured at their face amount.

*any change in fair value is recognized as profit or loss.


*Change in fair value recognized in other comprehensive income
*gain or loss to credit risk is not subsequently reclassified to profit or loss but recycled within equity or retained
earnings.
*Credit risk collateralized may be close to zero.

Classification of NONCURRENT LIABILITY


-all liabilities not classified as current liability are classified as non current;

Example;
 Noncurrent portion of long term debt
 Finance lease liability
 Deferred tax liability
 Long term obligation (bonds payable)
 Long term deferred revenue (advance payment, call in advance)
 Note payable

Measurement of NON-CURRENT LIABILITY


 Initially –present value
 Subsequent –amortized cost
*face amount is equal to the present value

*REFINANCING- noncurrent
- on long-term basis is completed on or before the reporting period
*UNCONDITIONAL RIGHT- existing loan defer settlement of liability at least 12 months after report

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