Current Liabilities and Contingencies

The International Accounting Standards board (IASB) issues the International Financial reporting standards (IFRS) to over one hundred ten countries. The United States is excluded from this group but primarily follows the standards of Financial Accounting Standards Board (FASB) and General Accepted Accounting Principles (GAAP). While both accounting standards have some differences, 2016 will be the year the U.S. will make the switch and unite with the IFRS. Current liabilities and contingencies are one of the many areas that standard setters continue to work on financial reporting and the major changes in how to recognize and measure contingent liabilities. The Statement of Financial Accounting Standards Board defines current liabilities as, “obligations whose liquidation is reasonably expected to require use of existing resources properly classified as current assets, or the creation of other current liabilities.” In addition, Statement of Financial Statement Standards indicates, “Current liabilities should include obligations that are due on demand or that will become due on demand within one year from the balance sheet date” (SFAS No.78). Operating Cycle is the time between the purchase of an asset and its sale, and the sale of product/good from the asset. Some examples of conventional current liabilities are Accounts payable, Notes Payable, unearned revenues, and employee related liabilities. One of the most popular current liabilities is accounts payable. This account is found on the balance sheet and represents the entity to pay off a short-term debt to its creditors. These are the payments that are owed by the company to other suppliers that offered the individual or company a good or service. There is a period of credit between both parties commonly for 30 - 60 days. For example, many companies offer a term of