Which of the following will satisfy the definition of a constructive liability,as outlined in the IASB Framework?
A) A decision by management to carry out maintenance over the next two years
B) A public offer to repair a defective good, even if it is out of warranty
C) A parent company's guarantee to meet the debts of a subsidiary entity if the subsidiary itself cannot pay them
D) All of the given options are correct

Question

Quizplus · Accepted Answer

A constructive liability arises when an entity has created a valid expectation in other parties that it will discharge certain responsibilities, even if there is no legal obligation. A public offer to repair a defective good, even if it is out of warranty, creates such an expectation.

Which of the Following Will Satisfy the Definition of a Constructive