Entities are only required to record a liability if there has been a past transaction that has created a present obligation to another entity that is expected to result in an outflow of future economic benefits.

Question

Quizplus · Accepted Answer

This statement is a correct statement of the recognition criteria for liabilities as per the International Financial Reporting Standards (IFRS) and generally accepted accounting principles (GAAP). To recognize a liability, there must be an obligation arising from a past transaction or event, which entails the entity's transfer of economic resources or settlement of a present obligation. The obligation must also result in an outflow of economic benefits that is probable and can be reliably measured.

Entities Are Only Required to Record a Liability If There