A constructive obligation arises when
A) the entity is legally obligated to honour the obligation.
B) the entity makes an unconditional promise to pay money in the future.
C) past or present company practice reveals the entity acknowledges a potential economic burden.
D) the entity has a conditional obligation which becomes unconditional if an uncertain future event occurs.

Question

Quizplus · Accepted Answer

A constructive obligation arises from an entity's past or present practice that indicates it acknowledges a potential economic burden, even if not legally enforceable.

A Constructive Obligation Arises When