Recognition Criteria of Liabilities

Hello Everyone, Today we are going to have a quick discussion over the recognition criteria of liabilities. 

In order for a liability to be recognized in the financial statements, it must meet the following definition provided by the framework:

"A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits."

In order for a liability to be recognized in the financial statements, it must meet the following definition provided by the framework:

A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits

- See more at: http://accounting-simplified.com/liability-recognition.html#sthash.p4iVmo8v.dpuf

Apart from satisfying the definition of liability, the framework has also advised the following recognition criteria to be met before a liability could be shown on the face of a financial statement: 

• The outflow of resources embodying economic benefits (such as cash) from the entity is probable. 
• The cost / value of the obligation can be measured reliably.

With regard to the first test, it is logical to recognize a liability only if it is likely that the entity will be required to settle it. The second test ensures that only liabilities that can be objectively measured are recognized in the financial statements.

If an obligation meets the definition of a liability but fails to meet the recognition criteria, it is classified as a contingent liability. Contingent liability is not presented as a liability in the statement of financial position but is instead disclosed in the notes to the financial statements.

This was the brief overview on the recognition criteria of liabilities. stay good

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Apart from satisfying the definition of liability, the framework has also advised the following recognition criteria to be met before a liability could be shown on the face of a financial statement:

• The outflow of resources embodying economic benefits (such as cash) from the entity is probable.
• The cost / value of the obligation can be measured reliably.

With regard to the first test, it is logical to recognize a liability only if it is likely that the entity will be required to settle it. The second test ensures that only liabilities that can be objectively measured are recognized in the financial statements.
If an obligation meets the definition of a liability but fails to meet the recognition criteria, it is classified as a contingent liability. Contingent liability is not presented as a liability in the statement of financial position but is instead disclosed in the notes to the financial statements.
- See more at: http://accounting-simplified.com/liability-recognition.html#sthash.p4iVmo8v.dpuf

Apart from satisfying the definition of liability, the framework has also advised the following recognition criteria to be met before a liability could be shown on the face of a financial statement:

• The outflow of resources embodying economic benefits (such as cash) from the entity is probable.
• The cost / value of the obligation can be measured reliably.

With regard to the first test, it is logical to recognize a liability only if it is likely that the entity will be required to settle it. The second test ensures that only liabilities that can be objectively measured are recognized in the financial statements.
If an obligation meets the definition of a liability but fails to meet the recognition criteria, it is classified as a contingent liability. Contingent liability is not presented as a liability in the statement of financial position but is instead disclosed in the notes to the financial statements.
- See more at: http://accounting-simplified.com/liability-recognition.html#sthash.p4iVmo8v.dpuf

Apart from satisfying the definition of liability, the framework has also advised the following recognition criteria to be met before a liability could be shown on the face of a financial statement:

• The outflow of resources embodying economic benefits (such as cash) from the entity is probable.
• The cost / value of the obligation can be measured reliably.

With regard to the first test, it is logical to recognize a liability only if it is likely that the entity will be required to settle it. The second test ensures that only liabilities that can be objectively measured are recognized in the financial statements.
If an obligation meets the definition of a liability but fails to meet the recognition criteria, it is classified as a contingent liability. Contingent liability is not presented as a liability in the statement of financial position but is instead disclosed in the notes to the financial statements.
- See more at: http://accounting-simplified.com/liability-recognition.html#sthash.p4iVmo8v.dpuf

Apart from satisfying the definition of liability, the framework has also advised the following recognition criteria to be met before a liability could be shown on the face of a financial statement:

• The outflow of resources embodying economic benefits (such as cash) from the entity is probable.
• The cost / value of the obligation can be measured reliably.

With regard to the first test, it is logical to recognize a liability only if it is likely that the entity will be required to settle it. The second test ensures that only liabilities that can be objectively measured are recognized in the financial statements.
If an obligation meets the definition of a liability but fails to meet the recognition criteria, it is classified as a contingent liability. Contingent liability is not presented as a liability in the statement of financial position but is instead disclosed in the notes to the financial statements.
- See more at: http://accounting-simplified.com/liability-recognition.html#sthash.p4iVmo8v.dpuf

Apart from satisfying the definition of liability, the framework has also advised the following recognition criteria to be met before a liability could be shown on the face of a financial statement:

• The outflow of resources embodying economic benefits (such as cash) from the entity is probable.
• The cost / value of the obligation can be measured reliably.

With regard to the first test, it is logical to recognize a liability only if it is likely that the entity will be required to settle it. The second test ensures that only liabilities that can be objectively measured are recognized in the financial statements.
If an obligation meets the definition of a liability but fails to meet the recognition criteria, it is classified as a contingent liability. Contingent liability is not presented as a liability in the statement of financial position but is instead disclosed in the notes to the financial statements.
- See more at: http://accounting-simplified.com/liability-recognition.html#sthash.p4iVmo8v.dpuf

Apart from satisfying the definition of liability, the framework has also advised the following recognition criteria to be met before a liability could be shown on the face of a financial statement:

• The outflow of resources embodying economic benefits (such as cash) from the entity is probable.
• The cost / value of the obligation can be measured reliably.

With regard to the first test, it is logical to recognize a liability only if it is likely that the entity will be required to settle it. The second test ensures that only liabilities that can be objectively measured are recognized in the financial statements.
If an obligation meets the definition of a liability but fails to meet the recognition criteria, it is classified as a contingent liability. Contingent liability is not presented as a liability in the statement of financial position but is instead disclosed in the notes to the financial statements.
- See more at: http://accounting-simplified.com/liability-recognition.html#sthash.p4iVmo8v.dpuf

Apart from satisfying the definition of liability, the framework has also advised the following recognition criteria to be met before a liability could be shown on the face of a financial statement:

• The outflow of resources embodying economic benefits (such as cash) from the entity is probable.
• The cost / value of the obligation can be measured reliably.

With regard to the first test, it is logical to recognize a liability only if it is likely that the entity will be required to settle it. The second test ensures that only liabilities that can be objectively measured are recognized in the financial statements.
If an obligation meets the definition of a liability but fails to meet the recognition criteria, it is classified as a contingent liability. Contingent liability is not presented as a liability in the statement of financial position but is instead disclosed in the notes to the financial statements.
- See more at: http://accounting-simplified.com/liability-recognition.html#sthash.p4iVmo8v.dpuf

Apart from satisfying the definition of liability, the framework has also advised the following recognition criteria to be met before a liability could be shown on the face of a financial statement:

• The outflow of resources embodying economic benefits (such as cash) from the entity is probable.
• The cost / value of the obligation can be measured reliably.

With regard to the first test, it is logical to recognize a liability only if it is likely that the entity will be required to settle it. The second test ensures that only liabilities that can be objectively measured are recognized in the financial statements.
If an obligation meets the definition of a liability but fails to meet the recognition criteria, it is classified as a contingent liability. Contingent liability is not presented as a liability in the statement of financial position but is instead disclosed in the notes to the financial statements.
- See more at: http://accounting-simplified.com/liability-recognition.html#sthash.p4iVmo8v.dpuf

Apart from satisfying the definition of liability, the framework has also advised the following recognition criteria to be met before a liability could be shown on the face of a financial statement:

• The outflow of resources embodying economic benefits (such as cash) from the entity is probable.
• The cost / value of the obligation can be measured reliably.

With regard to the first test, it is logical to recognize a liability only if it is likely that the entity will be required to settle it. The second test ensures that only liabilities that can be objectively measured are recognized in the financial statements.
If an obligation meets the definition of a liability but fails to meet the recognition criteria, it is classified as a contingent liability. Contingent liability is not presented as a liability in the statement of financial position but is instead disclosed in the notes to the financial statements.
- See more at: http://accounting-simplified.com/liability-recognition.html#sthash.p4iVmo8v.dpuf

Apart from satisfying the definition of liability, the framework has also advised the following recognition criteria to be met before a liability could be shown on the face of a financial statement:

• The outflow of resources embodying economic benefits (such as cash) from the entity is probable.
• The cost / value of the obligation can be measured reliably.

With regard to the first test, it is logical to recognize a liability only if it is likely that the entity will be required to settle it. The second test ensures that only liabilities that can be objectively measured are recognized in the financial statements.
If an obligation meets the definition of a liability but fails to meet the recognition criteria, it is classified as a contingent liability. Contingent liability is not presented as a liability in the statement of financial position but is instead disclosed in the notes to the financial statements.
- See more at: http://accounting-simplified.com/liability-recognition.html#sthash.p4iVmo8v.dpuf

Apart from satisfying the definition of liability, the framework has also advised the following recognition criteria to be met before a liability could be shown on the face of a financial statement:

• The outflow of resources embodying economic benefits (such as cash) from the entity is probable.
• The cost / value of the obligation can be measured reliably.

With regard to the first test, it is logical to recognize a liability only if it is likely that the entity will be required to settle it. The second test ensures that only liabilities that can be objectively measured are recognized in the financial statements.
If an obligation meets the definition of a liability but fails to meet the recognition criteria, it is classified as a contingent liability. Contingent liability is not presented as a liability in the statement of financial position but is instead disclosed in the notes to the financial statements.
- See more at: http://accounting-simplified.com/liability-recognition.html#sthash.p4iVmo8v.dpuf