Under the currently proposed definition of a liability, what is the most important aspect to consider when deciding whether the item should be recognized as a liability?
A)The item represents an economic obligation for which a present obligation exists
B)The item is shown on the balance sheet
C)The transaction underlying the obligation has occurred
D)The item is measurable

Question

Quizplus · Accepted Answer

The most important aspect to consider when deciding whether an item should be recognized as a liability is whether it represents an economic obligation for which a present obligation exists. This means that there is a current obligation that must be fulfilled in the future, which may require the expenditure of resources or the incurrence of additional liabilities. Simply being shown on the balance sheet or being measurable is not sufficient to qualify an item as a liability, and the transaction underlying the obligation may not have occurred yet, but the obligation is still recognized if it meets the definition of a liability.

Under the Currently Proposed Definition of a Liability, What Is