An equitable or constructive obligation arises when:
A) Social or moral sanctions or custom leaves the entity no realistic alternative other than to make a sacrifice of future benefits.
B) Management makes a discretionary decision to make a future sacrifice of economic benefits.
C) Management communicates its decision to commit to the future sacrifice of economic benefits to the parties concerned.
D) Social or moral sanctions or custom leaves the entity no realistic alternative other than to make a sacrifice of future benefits and management communicates its decision to commit to the future sacrifice of economic benefits to the parties concerned.

Question

Quizplus · Accepted Answer

An equitable or constructive obligation arises when social or moral sanctions or custom leaves the entity no realistic alternative other than to make a sacrifice of future benefits and management communicates its decision to commit to the future sacrifice of economic benefits to the parties concerned. Both conditions must be met for an equitable or constructive obligation to arise. Option A and B are partially correct but do not cover all aspects of the definition, while option C only covers one aspect of the definition. Therefore, option D is the best choice.

An Equitable or Constructive Obligation Arises When