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An update for liabilities
PRBA003 CORPORATE ACCOUNTING

Department Name
Simon Morris
00 Month 2010
Law And Business

AASB 137 defines a liability as a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
This is the same as the definition in the AASB Framework
There are three parts to a liability,
There must be a present obligation (legal or constructive)
It must have arisen because of a past event, and
It must result in the giving up of economic resources to satisfy the claims of other parties.
An update for liabilities| PRBA003 | Slide 2

Liability recognition in the balance sheet depends upon it is probable that economic benefits will flow from the entity; and the value of the liability can be reliably measured.
If the entity can determine whether any a future sacrifice of economic resources should take place or not, then there appears to be no present obligation and a liability does not exist. An update for liabilities| PRBA003 | Slide 3

1

Contingent liabilities cannot be recognised by an entity on the balance sheet but will be disclosed in the notes to the accounts if the possibility of payment is not remote.
A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.
It is a present obligation that arises from past events but it is not recognised because it is not probable that there will be an outflow of resources to settle the obligation or the amount cannot be measured with sufficient reliability.
Examples include guarantees given on behalf of others debts or potential damages from legal actions.
An update for liabilities| PRBA003 | Slide 4

Liabilities will be...

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