In a constructive obligation where the entity retains discretion to avoid any future sacrifice of economic benefits,no liability should be recognised in the financial statements.

Question

Quizplus · Accepted Answer

In accounting, a constructive obligation where the entity retains discretion to avoid future sacrifice of economic benefits does not meet the criteria for liability recognition, as there is no present obligation that requires an outflow of resources.

In a Constructive Obligation Where the Entity Retains Discretion to Avoid