All of the following are criteria that financial reporting requires before recognizing an obligation as a liability except:
A) The transaction or event that gave rise to the obligation has already occurred.
B) The firm has a present obligation and little or no discretion to avoid the transfer.
C) The firm must know the precise amount of the obligation before recording it.
D) The obligation involves a probable future sacrifice of economic benefits-a future transfer of cash, goods, or services; the forgoing of a future cash receipt; or the transfer of equity shares-at a specified or determinable date.The firm can measure with reasonable precision the cash-equivalent value of the resources needed to satisfy the obligation.

Question

Quizplus · Accepted Answer

Financial reporting does require that the transaction or event giving rise to the obligation has occurred, the firm has a present obligation with little or no discretion to avoid the transfer, and the obligation involves a probable future sacrifice of economic benefits that can be measured with reasonable precision. However, the precise amount of the obligation does not need to be known before it is recognized as a liability. Instead, the firm must be able to estimate the amount with reasonable accuracy. Therefore, option C is the exception to the criteria for recognizing an obligation as a liability.

All of the Following Are Criteria That Financial Reporting Requires