Current Liabilities and Contingencies Current Liabilities IAS 1, Presentation of Financial Statements, requires liabilities to be classified as current or noncurrent. Current liabilities are those liabilities that a company: a. expects to settle in its normal operating cycle, b. holds primarily for the purpose of trading, c. expects to settle within twelve months of the balance sheet date, or d. does not have the right to defer until twelve months after the balance sheet date.
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ACCOUNTING 11 Current Liabilities, Contingencies & Provisions Required Reading: Alfredson – Chap 5, Keiso – Chaps 13, IAS 37 Learning Objectives 1. CURRENT LIABILITIES: – Define and explain types of current liabilities. – Account for the major types 2. IAS 37 PROVISIONS & CONTINGENCIES – Define Provisions and answer the following questions: • • • Why do them When to provide How much to provide – Calculate and account for Restructuring Provisions – Define Contingent Assets & Liabilities and apply
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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
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out that accrual of loss contingencies for unsettled litigation is rare, in practice. My co-worker also points out that if we disclose that management believes that it is probable that Camp Industries will lose a specific dollar amount, that this could serve as ammunition for the opposing legal counsel. His opinion is that a loss should not be accrued and recorded until a final settlement has been reached in the lawsuit. This ethical dilemma deals with loss contingencies. According to our textbook
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General Accepted Accounting Principles. Matters to be discussed: * The liability to be recorded by M financial statements, for the year-end December 31, 2007 * What adjustments should be done if any, for the year-ended December 31, 2009, financial statements; should the amount be recognized as a 2009 event or as a prior period adjustment. * When should M record a deduction of the previously recorded loss contingency Solution To understand the topic to be discussed is necessary to
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CHAPTER 13 Current Liabilities and Contingencies ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics 1. Concept of liabilities; definition and classification of current liabilities. Accounts and notes payable; dividends payable. Short-term obligations expected to be refinanced. Deposits and advance payments. Compensated absences. Collections for third parties. Contingent liabilities (General). Guaranties and warranties. Premiums and awards offered to customers. Self-insurance, litigation, claims
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CHAPTER 13 Current Liabilities and Contingencies ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics 1. Concept of liabilities; definition and classification of current liabilities. Accounts and notes payable; dividends payable. Short-term obligations expected to be refinanced. Deposits and advance payments. Compensated absences. Collections for third parties. Contingent liabilities (General). Guaranties and warranties. Premiums and awards offered to customers. Self-insurance, litigation, claims
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1. A liability has three essential characteristics, which of the following is not one of them? a. It is a present obligation that entails settlement by probable future transfer or use of cash, goods or services b. The obligation must be liquidated using cash, goods, or services that were earned by the entity in the performance of their normal business operation c. The liability must be an unavoidable obligation d. The transaction or other event creating
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reliable, and comparable. These statements are used by users not only to look at the current situation, but also to predict the company’s ability to continue as a going concern or functioning as a business entity in the future. The balance sheet and the valuations for assets and liabilities are a reflection of the company’s financial position for the next 12 months. If there are uncertainties or contingencies that occur they must be disclosed in the footnotes section of the statement and in some
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With respect to contingent liabilities, the proposal suggests that current obligations are the only ones to consider when accounting for liabilities, which in themselves should be stated separately from the events which may dictate their occurrence. The uncertainty of the events themselves should also be disclosed, when presenting the measurements for the liability. Additionally, defining contingency with regard to the amount required to settle a liability rather than the probability of its occurrence
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