In disclosing liabilities,a reporting entity:
A) Discloses on the basis of the current/non-current liability dichotomy.
B) Has a choice, based on the notions of relevance and reliability to disclose liabilities either on the basis of the current/non-current liability dichotomy or on the basis of order of liquidity.
C) Has a choice, based on the principle of conservatism to disclose liabilities either on the basis of the current/non-current liability dichotomy or on the basis of order of liquidity.
D) Discloses on the basis of order of liquidity.
E) Discloses on the basis of directions from its auditor.

Question

Quizplus · Accepted Answer

The reporting entity has a choice to disclose liabilities either on the basis of the current/non-current liability dichotomy or on the basis of order of liquidity, based on the notions of relevance and reliability. This choice should be made based on which method provides more useful information to the users of the financial statements. The principle of conservatism does not necessarily dictate the method of disclosure. The auditor does not dictate the method of disclosure either. Therefore, option B is the best choice.

In Disclosing Liabilities,a Reporting Entity