In disclosing liabilities,a reporting entity:
A) discloses on the basis of the current/non-current liability dichotomy.
B) has a choice, based on the notions of relevance and reliability to disclose liabilities either on the basis of the current/non-current liability dichotomy or on the basis of order of liquidity.
C) has a choice, based on the principle of conservatism to disclose liabilities either on the basis of the current/non-current liability dichotomy or on the basis of order of liquidity.
D) discloses on the basis of order of liquidity.

Question

Quizplus · Accepted Answer

The reporting entity has a choice between disclosing liabilities on the basis of the current/non-current liability dichotomy or on the basis of order of liquidity. This choice should be based on the notions of relevance and reliability which means that the information disclosed should be useful to the users of financial statements and should be based on reliable information. Therefore, the best choice is B as it allows the entity to disclose liabilities in a way that is both relevant and reliable.

In Disclosing Liabilities,a Reporting Entity