Accounting for Normal Liabilities and Continent Liabilities
8 Pages2116 Words44 Views
Added on 2020-04-01
Accounting for Normal Liabilities and Continent Liabilities
Added on 2020-04-01
ShareRelated Documents
FINANCIAL ACCOUNTINGACCOUNTING FOR NORMAL LIABILITIES AND CONTIGENT LIABILITIES NameCourse: Professor’s NameInstitutionCityDate
FINANCIAL ACCOUNTINGAbstract; It’s irrational to expect self-sustenance and own reliance on the available limited resourcesamong blue chip companies hence the need to depend on each other for different resources. It isfrom this dependency that liabilities are seen to exist in the context. Financial reportingapplicable in the accounting standards during recognition, disclosure and measuring of liabilitiesview the latter as applied theory depending on prevailing conditions. This therefore sets thebenchmark analysis for practical applicability during recognition and measurement of liabilitiesin the financial position as well as its disclosure implication in the foot notes of the financialstatements pursuant to accounting standards in place.Introduction;The financial statement item liability arises because there exist no timely payment ofpayables hence outstanding mostly at the time of reporting and since they form the great part ofentities obligation there exist the need for measurability, recognition, disclosure, and provisiontoo. By virtue of being future sacrifices of economic gains that entities are obliged for uponpast transaction, therefore, the need for recognition of liabilities in the balance sheet is highlyrequired. Recognition starts from identification of the existence of the liabilities upon proofs offuture benefits and measurability aspects via monetary presentation Fischer(2010, Pg.54). The existence of liabilities especially current is only approved upon verifiability aspect ofamounts value that requires payment on specific dates. Recognition is mostly done in thestatement of financial position as well as in the statement of cash flow upon contra payment doneon debtors as illustrated in Rio Tinto Ltd annual reports of the financial statements year 2016Deegan(2012.Pg 17)wherein the cash flow there exist cash outflow on repayment of borrowing
FINANCIAL ACCOUNTINGas well as recognition of current and non-current liabilities of trade and other payables, taxpayables Sawyer(2010.Pg 5) and borrowings as well as other financial liabilities that aresomehow partly recognized hence disclosure done in notes 30 of the statements Cairns(2011,Pg18).There is finally recognition of provision of made on post-retirement benefit made in thestatement of financial position and that of liabilities of disposals that are held for sale. Rio TintoLtd annual reports has, therefore, illustrated presentation of liabilities in the financial position aswell as partly disclosure in the notesIAS 37 defines items whose present purpose entirely relies on the occurrence of uncertain futureevents thus no certainty on its payment return to as contingent liability. The same IAS 37standard dictates to what is extent are the item important to the users of the information hencethe need for disclosure in the financial notes. It is more of currently resolving and settlingexpectation of past events although due to its probability nature amount is mostly no measurable. Accounting for liability is so vital since it affects the income statement and financial positionin totality as long as the debt obligation is probable and respective amount can be approximatedor determined. The benchmark applied while accounting for the contingent liability is a little bitdifferent to that exercised on the normal liabilities since its existence depends on whether theexpected outcome of events uncertain future events will occur or not relatively exclusive fromthe internal control of the firms. There are two events that ought to happen so as to define an item as a contingent liability; (a)is the absence of surety that there will exist return economic in nature that can settle the debtat hand while (b)is the reliability of the amount in the measure. It is further seen that theexistence of (a) and (b) events explains why it is not possible to recognize this liability in the
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
Business And Corporate Accounting Assignmentlg...
|12
|651
|19
Financial Reporting Assignment Sample - Doclg...
|4
|645
|37
Liabilities of a Company: Assignmentlg...
|4
|1220
|363
Mining Company in Australia- BHP Billitonlg...
|2
|577
|47
Advanced Accounting | Task Reportlg...
|9
|1620
|18
Financial Reporting Solved Assignment (Doc)lg...
|6
|1369
|146