1.

) liability is something a person or company owes, usually a sum of money. ... Recorded on
the right side of the balance sheet, liabilities include loans, accounts payable, mortgages,
deferred revenues, bonds, warranties, and accrued expenses.
2.) The essentials characteristics of liability are (1) a present obligation; (2) a past transaction or
event; and (3) a probable future sacrifice of economic benefits.
3.) Examples of liabilities are Bank debt, Mortgage debt, Money owed to suppliers (accounts
payable), Wages owed, and Taxes owed.
4.) For inter-company loans within the scope of PFRS 9, both the lender and the borrower are
required to initially record the loan at fair value (plus directly attributable transaction costs for
items that will not be measured at fair value through profit or loss subsequently) in
accordance with PFRS 9.5.1.1. Inter-company loans do not have an active market, hence,
their fair values must be estimated. PFRS 13.47 provides that the fair value of a financial
liability with a demand feature is not less than the amount repayable on demand, discounted
from the first date that the amount could be required to be paid. PFRS 9.B5.1.1 clarifies that
the appropriate way to estimate the fair value of a long-term loan or receivable that carries
no interest is to determine the present value of future cash flows using the prevailing market
rate of interest for a similar instrument. The fair value of inter-company loans at initial
recognition may not necessarily be the same as the loan amount, thus, a “difference” will
arise. For loans between a parent and a subsidiary, this difference, however, cannot be
classified as outright income or loss as contributions from and distributions to “equity
participants” do not meet the basic definition of income or expenses
5.) Transaction costs are expenses incurred when buying or selling a good or service. ... In a
financial sense, transaction costs include brokers' commissions and spreads, which are the
differences between the price the dealer paid for a security and the price the buyer pays.
6.) The fair value of a financial asset or liability on a given date is the amount for which it could
be exchanged or settled, respectively, on that date between two knowledgeable, willing
parties in an arm’s length transaction under market conditions. The most objective and
common reference for the fair value of a financial asset or liability is the price that would be
paid for it on an organized, transparent and deep market (“quoted price” or “market price”). If
there is no market price for a given financial asset or liability, its fair value is estimated on
the basis of the price established in recent transactions involving similar instruments or, in
the absence thereof, by using mathematical measurement models that are sufficiently tried
and trusted by the international financial community. The estimates used in such models
take into consideration the specific features of the asset or liability to be measured and, in
particular, the various types of risk associated with the asset or liability. However, the
limitations inherent in the measurement models and possible inaccuracies in the
assumptions and parameters required by these models may mean that the estimated fair
value of an asset or liability does not exactly match the price for which the asset or liability
could be exchanged or settled on the date of its measurement.
7.) A financial asset or financial liability is measured initially at fair value. Subsequent
measurement depends on the category of financial instrument. Some categories
are measured at amortized cost, and some at fair value.
8.) Liabilities measured at amortized cost are accounted for using the effective interest
method with interest expense recognized in P/L. Financial liabilities at amortized cost. The
default position is, and the majority of financial liabilities are, classified and accounted for
at amortized cost. Financial liabilities that are classified as amortized cost are initially
measured at fair value minus any transaction costs.
9.) Non-current liabilities or long-term obligations are measured at face amount or present value
depending on whether they are Interest-bearing or Noninterest-bearing. If the non-current
liability is interest-bearing, it is measured at Face Amount, Because in this case, the face
amount is already the present value of the obligation. And If the noncurrent liability is
noninterest-bearing, it is measured at Present Value, This requires amortization of the
discount or the difference between the face amount and the present value using the
effective method.
10. Current Liabilities or short-term obligations are not discounted anymore but measured,
recorded, and reported at their Face Amount. The reason for this is that the discount or the
difference between the face amount and the present value is usually not material and
therefore ignored.
11. Financial liability managed on a fair value basis. This option to designate financial liabilities
to me measured at FVTPL applies when an entity manages and evaluates the
performance of a group of financial liabilities or financial assets and financial liabilities in
such a way that measuring that group at FVTPL results in more relevant information. The
focus is on the way the entity manages and evaluates performance, instead of on the
nature of its financial instruments (IFRS 9.B4.1.33). The following conditions must be met
in order to use this option (IFRS 9.4.2.2(b)): an entity must have a documented risk
management or investment strategy (see also IFRS 9. B4.1.36) and information about the
group of financial liabilities (and financial assets if applicable) is provided internally on that
basis to the entity’s key management personnel. Note that such an option is not explicitly
available for financial assets, but this is because financial assets measured on a fair value
basis would fall into FVTPL category based on the business model criterion, so there is no
need for such an option.
12. estimated liability is a debt or obligation of an unknown amount that can be
reasonably estimated. In other words, it's a known liability that management knows exists,
but there is no way of knowing the exact amount of the liability.
13. Provision means a measurement or other means for meeting a need. a supply or stock of
something provided.
14. A liability is a present obligation of an entity arising from past events, the settlement of
which is expected to result in an outflow from the entity of resources embodying economic
benefits while A provision represents a present obligation that is uncertain in its timing or
amount.
15. Recognition of a provision. An entity must recognize a provision if, and only if: [IAS 37.14]
 a present obligation (legal or constructive) has arisen as a result of a past event (the
obligating event),
 
 payment is probable ('more likely than not'), and
 
 the amount can be estimated reliably. An obligating event is an event that creates a legal
or constructive obligation and, therefore, results in an entity having no realistic
alternative but to settle the obligation. [IAS 37.10] A constructive obligation arises if past
practice creates a valid expectation on the part of a third party, for example, a retail store
that has a long-standing policy of allowing customers to return merchandise within, say,
a 30-day period. [IAS 37.10] A possible obligation (a contingent liability) is disclosed but
not accrued. However, disclosure is not required if payment is remote.
16. Present obligation arises from an obligating event and may take the form of either a
legal obligation or a constructive obligation. ... If the entity can avoid the future expenditure
by its future actions, it has no present obligation, and no provision is required.
17. Obligating event is an event that creates a legal or constructive obligation and, therefore,
results in an entity having no realistic alternative but to settle the obligation.
18. Probable outflow of economic benefits would be recognized as a provision, whereas a
probable inflow would only be shown as a contingent asset and merely disclosed in the
financial statements. Therefore, two sides in the same court case could have differing
accounting treatments despite the likelihood of the pay-out being identical for either party.
Many respondents highlighted this asymmetric prudence as necessary under some
accounting standards and felt that a discussion of the term was required. Whilst this is true,
the Board believes that the Framework should not identify asymmetric prudence as a
necessary characteristic of useful financial reporting.
19. Provision is measured at the amount that the entity would rationally pay to settle the
obligation at the end of the reporting period or to transfer it to a third party at that time.
Risks and uncertainties are taken into account in measuring a provision. A provision is
discounted to its present value.
20. Expected value method means You would use this method when you have a range of
possible outcomes or you measure the provision for large amount of items. In this case,
you need to weight each outcome by its probability (for example, warranty repair costs for
10 000 products).
21. Onerous contract is a contract in which the unavoidable costs of meeting the obligations
under the contract exceed the economic benefits expected to be received under it.
22. Examples of provisions include: Accruals, Asset impairments, Bad debts, Depreciation,
Doubtful debts, Guarantees (product warranties), Income taxes, Inventory obsolescence,
Pension, Restructuring Liabilities, and Sales allowances
23. A restructuring as such takes place when the changes in a company pertain to legal
norms. These can be changes in ownership, legal business paperwork, agreements, etc.
Restructuring can be harsh for a workforce at times. The sudden layoffs are never easy,
and the negativity may affect the job satisfaction of the remaining employees as well.
Therefore, you must be careful in this aspect to handle your workforce well.
24. a provision for restructuring costs is recognized only when the entity has a constructive
obligation because the main features of the detailed restructuring plan have been
announced to those affected by it.

25. The amounts to be included in a restructuring provision are restricted to the direct
expenditures arising from the restructuring, i.e. those that are both: necessarily entailed by
the restructuring; and not associated with the ongoing activities of the reporting entity.

26. Contingent liability is a possible obligation depending on whether some uncertain future
event occurs, or a present obligation but payment is not probable or the amount cannot be
measured reliably.

27. Level 1: A Clear-Enough Future. At level 1, managers can develop a single forecast of the
future that is precise enough for strategy development. Although it will be inexact to the
degree that all business environments are inherently uncertain, the forecast will be sufficiently
narrow to point to a single strategic direction. In other words, at level 1, the residual
uncertainty is irrelevant to making strategic decisions. Consider a major airline trying to
 develop a strategic response to the entry of a low-cost, no-frills competitor into one of its hub
airports. Should it respond with a low-cost service of its own? Should it cede the low-cost
niche segments to the new entrant? Or should it compete aggressively on price and service in
an attempt to drive the entrant out of the market? To make that strategic decision, the airline’s
executives need market research on the size of different customer segments and the likely
response of each segment to different combinations of pricing and service. They also need to
know how much it costs the competitor to serve, and how much capacity the competitor has
for, every route in question. Finally, the executives need to know the new entrant’s
competitive objectives to anticipate how it would respond to any strategic moves their airline
might make. In today’s U.S. airline industry, such information is either known already or is
possible to know. It might not be easy to obtain—it might require new market research, for
example—but it is inherently knowable. And once that information is known, residual
uncertainty would be limited, and the incumbent airline would be able to build a confident
business case around its strategy. Level 2: Alternate Futures. At level 2, the future can be
described as one of a few alternate outcomes, or discrete scenarios. Analysis cannot identify
which outcome will occur, although it may help establish probabilities. Most important,
some, if not all, elements of the strategy would change if the outcome were predictable. Many
businesses facing major regulatory or legislative change confront level 2 uncertainty.
Consider U.S. long-distance telephone providers in late 1995, as they began developing
strategies for entering local telephone markets. By late 1995, legislation that would
fundamentally deregulate the industry was pending in Congress, and the broad form that new
regulations would take was fairly clear to most industry observers. But whether or not the
legislation was going to pass and how quickly it would be implemented in the event it did
pass were uncertain. No amount of analysis would allow the long-distance carriers to predict
those outcomes, and the correct course of action—for example, the timing of investments in
network infrastructure—depended on which outcome occurred. In another common level 2
situation, the value of a strategy depends mainly on competitors’ strategies, and those cannot
yet be observed or predicted. For example, in oligopoly markets, such as those for pulp and
paper, chemicals, and basic raw materials, the primary uncertainty is often competitors’ plans
for expanding capacity: Will they build new plants or not? Economies of scale often dictate
that any plant built would be quite large and would be likely to have a significant impact on
industry prices and profitability. Therefore, any one company’s decision to build a plant is
often contingent on competitors’ decisions. This is a classic level 2 situation: The possible
outcomes are discrete and clear. It is difficult to predict which one will occur. And the best
strategy depends on which one does occur. Level 3: A Range of Futures. And At level 3, a
range of potential futures can be identified. That range is defined by a limited number of key
variables, but the actual outcome may lie anywhere along a continuum bounded by that range.
There are no natural discrete scenarios. As in level 2, some, and possibly all, elements of the
strategy would change if the outcome were predictable.

28. A provision is a liability of uncertain timing or amount. An entity recognizes a provision if it

is probable that an outflow of cash or other economic resources will be required to settle
the provision. while If an outflow is not probable, the item is treated as a contingent
liability.

29. No treatment. Do not record or disclose a contingent liability if the probability of its
occurrence is remote. There are four contingent liability treatments and these are
 probable and estimable, probable and inestimable, reasonably possible, and remote.
Recognition in financial statements, as well as a note disclosure, occurs when the outcome
is probable and estimable.

30. Contingent Liability Disclose the existence of a contingent liability in the notes
accompanying the financial statements if the liability is reasonably possible but not
probable, or if the liability is probable, but you cannot estimate the amount.
“Reasonably possible” means that the chance of the event occurring is more than
remote but less than likely.

31. Contingent asset is a potential economic benefit that is dependent on future events out of
a company's control. Not knowing for certain whether these gains will materialize, or being
able to determine their precise economic value, means these assets cannot be recorded
on the balance sheet.

32. Contingent Asset may disclose when it is more likely than not that an inflow of benefits
will occur. However, when the inflow of benefits is virtually certain an asset is recognized in
the statement of financial position, because that asset is no longer considered to be
contingent.