After studying this chapter, you should be able to:

  1. 1 Describe the nature, type, and valuation of current liabilities.
  2. 2 Explain the classification issues of short-term debt expected to be refinanced.
  3. 3 Identify types of employee-related liabilities.
  4. 4 Explain the accounting for different types of provisions.
  5. 5 Identify the criteria used to account for and disclose contingent liabilities and assets.
  6. 6 Indicate how to present and analyze liability-related information.

Now You See It, Now You Don't

A look at the liabilities side of the statement of financial position of the company Beru AG Corporation (DEU), dated March 31, 2003, shows how international standards are changing the reporting of financial information. Here is how one liability was shown on this date:


Do you believe a liability should be reported for such transactions? Anticipated losses means the losses have not yet occurred; pending transactions mean that the condition that might cause the loss has also not occurred. So where is the liability? To whom does the company owe something? Where is the obligation?

German accounting rules in 2003 were permissive. They allowed companies to report liabilities for possible future events. In essence, the establishment of this general-purpose “liability” provided ...

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