Assessment of IASB Conceptual Framework Revision on Liabilities

This presentation examines the March 2018 revision of the IASB Conceptual Framework, specifically focusing on the definition and recognition of liabilities. It explores the changes made to the definition of a liability, emphasizing the shift towards recognizing a present obligation to transfer an economic resource due to past events. The presentation highlights improvements in the framework, such as the increased availability of information regarding liabilities, the faithful representation of liabilities in financial statements, and the inclusion of the cost constraint. It also discusses the framework's influence on derecognition, the presentation of financial position, and the provision of criteria for faithful representation. The presentation concludes by summarizing the key enhancements in the revised framework and its impact on financial reporting, providing a deeper understanding of the changes for improved financial statement analysis.

IASB Conceptual
Framework
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Date:

 International Accounting Standards Board had
not made any revisions on conceptual
framework since its inception.
 In March 2018,ISAB made revision on the
conceptual framework.
 The revision affected the definitions of various
terms including liability.
 It came up with new guidance as to how to
present, measure and disclose various financial
statement. IASB mainly focused on areas that
showed obvious shortcomings and had not yet
been covered before.
Introduction

 The definition of liability became “a present
recognition of the entity to transfer an
economic resource as a result of past
events”.
 The revision also led to a separation of the
definition of economic resource.
 Expression of "economic resource" and not
just "resource"
 No more mere use of ‘expected outflows’
but rather more information regarding the
outflows.
Definition of Liability

 The framework introduces the concept
where there is no practical ability to avoid a
liability as an entity.
 Assessment of an obligation to be based on
factors such as the nature and responsibility
of the entity.
 More use of judgment in establishing an
obligation
 New application of the concept of obligation
in different circumstances.
Definition of Liability

 The framework points out how items will
meet their various definitions.
 recognition of items that meet the definition
of equity or liability in the statement of
financial position
 Provision of users with information
regarding the liability.
 Users will have access to faithful
representation regarding liabilities and any
changes made.
Recognition of Liabilities

 The framework put into consideration the
aspect of derecognition.
 The requirements are driven with the aim of
retainment of the liabilities after the
transaction.
 Faithful presentation of the liabilities upon
change or any other event after the transaction
 The framework presents other alternatives
incase a particular aim of recognition is snot
met.
Recognition of Liabilities

 The new conceptual framework provided
key improvements in the process of
definition and recognition of liabilities.
 Users now have access to more information
regarding liabilities
 Faithful representation of liabilities in the
financial statement.
 Recognition of the cost constraint.
Improvements

 Information being used to refer to liabilities
only refer to the qualitative characteristics.
 Development of a more coherent set of
concepts.
 Provision of criterion in the event of faithful
representation or recognition inconsistency
of a liability.
 Recognition involve the depiction of
financial position in the form of a structured
summary.
Improvements

conclusion
•In March 2018,ISAB made revision on the conceptual
framework.
•The revision affected the definitions of various terms.
•The definition of liability became “a present recognition of
the entity to transfer an economic resource as a result of
past events”.
•The new conceptual framework provided key
improvements in the process of definition and recognition
of liabilities.
•Users now have access to more information regarding
liabilities

 Nikolai, L., Bazley, J., & Jones, J. (2009). Intermediate Accounting
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 Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2010). Intermediate
Accounting: IFRS Edition. Hoboken, NJ: John Wiley & Sons.
 Burton, G. F., & Jermakowicz, E. K. (2015). International Financial
Reporting Standards: A Framework-Based Perspective. London,
England: Routledge.
References