On a statement of financial affairs, a company's liabilities should be valued at

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On a statement of financial affairs, a company's liabilities should be valued at the amount required for settlement, which is the amount expected to be paid to creditors to satisfy the debts. This is also known as the liquidation value of the liabilities. Valuing at the present value of future cash flows (A) or net realizable value (B) is not appropriate for liabilities as they represent obligations to pay a fixed amount. Replacement cost (D) is used for valuing assets, not liabilities. The amount expected to be paid if the company could honor its debts (E) is not relevant in the case of a financial affairs statement, which assumes the company is unable to pay its debts.

On a Statement of Financial Affairs, a Company's Liabilities Should