Intermediate Accounting, Thirteenth Edition

Chapter 13. CURRENT LIABILITIES AND CONTINGENCIES

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

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Now You See It, Now You Don't

A look at the liabilities side of the balance sheet of the German company Beru AG Corporation, 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:

Anticipated losses arising from pending transactions

3,285,000 euros

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?

U.S. GAAP provides guidance on this subject. A company can accrue a liability for a contingency only if an obligation has ...