PROBLEM 1: TRUE OR FALSE 1. A liability can result from past, present or future events, 2. A liability can exist even if the party to whom the obligation is owed is not specifically identified. 3. A long-term debt that is maturing within 12 months from the end of the reporting period is a current liability. 4. A currently maturing debt that the entity's management intends to refinance is presented as noncurrent. 5. Trade payables are normally presented as current liabilities. 6. Amortized cost liabilities are subsequently measured at the present value of the cash outflows from the instrument. 7. Entity A's long-term loan can be accelerated by the creditor if Entity A fails to maintain a current ratio of at least 2:1. At the reporting date, Entity A's current ratio is 3:1. The loan should be classified as a current liability. 8. A deferred tax liability that is expected to reverse within 12 months after the reporting period is presented as a current liability. 9. Liabilities for cash dividends are normally presented as current liabilities unless the dividends are clearly due beyond twelve months after the reporting period. 10. Financial liabilities, except those that are classified as FVPL., are initially measured at fair value plus transaction costs.
Question
PROBLEM 1: TRUE OR FALSE
- A liability can result from past, present or future events,
- A liability can exist even if the party to whom the obligation is owed is not specifically identified.
- A long-term debt that is maturing within 12 months from the end of the reporting period is a current liability.
- A currently maturing debt that the entity's management intends to refinance is presented as noncurrent.
- Trade payables are normally presented as current liabilities.
- Amortized cost liabilities are subsequently measured at the present value of the cash outflows from the instrument.
- Entity A's long-term loan can be accelerated by the creditor if Entity A fails to maintain a current ratio of at least 2:1. At the reporting date, Entity A's current ratio is 3:1. The loan should be classified as a current liability.
- A deferred tax liability that is expected to reverse within 12 months after the reporting period is presented as a current liability.
- Liabilities for cash dividends are normally presented as current liabilities unless the dividends are clearly due beyond twelve months after the reporting period.
- Financial liabilities, except those that are classified as FVPL., are initially measured at fair value plus transaction costs.
Solution
- True. A liability can result from past, present, or future events that will require an outflow of resources.
- True. A liability can exist even if the party to whom the obligation is owed is not specifically identified.
- True. A long-term debt that is maturing within 12 months from the end of the reporting period is considered a current liability.
- False. A currently maturing debt that the entity's management intends to refinance is still presented as a current liability until the refinancing is actually completed.
- True. Trade payables are normally presented as current liabilities because they are usually due within one year.
- False. Amortized cost liabilities are subsequently measured at the original amount minus any repayments, plus or minus the cumulative amortization.
- False. Entity A's long-term loan should not be classified as a current liability because the condition that would accelerate the payment (a current ratio below 2:1) is not met.
- True. A deferred tax liability that is expected to reverse within 12 months after the reporting period is presented as a current liability.
- True. Liabilities for cash dividends are normally presented as current liabilities unless the dividends are clearly due beyond twelve months after the reporting period.
- True. Financial liabilities, except those that are classified as FVPL, are initially measured at fair value plus transaction costs.
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