When an entity's management resolves that the entity will offer to repair a defect it has recently discovered in one of its products,even though the nature of the defect is such that purchasers of the product would not expect the entity to do so:
A) it must immediately recognise a liability.
B) it must immediately recognise a liability, if it can be measured reliably.
C) it will never recognise a liability as the offer to repair was not part of the contract of sale.
D) it will only need to recognise a liability when the entity makes the offer public, or commits itself in some other way to make the repairs.

Question

Quizplus · Accepted Answer

A liability is recognized when the entity has a present obligation as a result of a past event, and it is probable that an outflow of resources will be required to settle the obligation. The entity must also have made the offer public or committed itself to the repairs.

When an Entity's Management Resolves That the Entity Will Offer