In many cases, an entity may have an implicit obligation even if it is NOT explicitly noted in a sales contract. This is called a(n)
A) onerous obligation.
B) legal obligation.
C) constructive obligation.
D) earnings obligation.

Question

Quizplus · Accepted Answer

A constructive obligation is an obligation that arises as a result of an entity's past actions, even though it is not explicitly stated in a contract or legal agreement. It is based on an entity's established pattern of behavior, and it is often recognized as a result of accounting standards, tax laws, or other regulatory requirements. Examples of constructive obligations include an entity's obligation to provide warranty repairs or to honor gift cards that have been issued but not yet redeemed.

In Many Cases, an Entity May Have an Implicit Obligation