What are the two criteria, specified in the Conceptual Framework, that must be met before a liability can be recognised in the accounting records?
A) It must be probable that any future sacrifices associated with the item will flow from the entity and the liability must have a cost or value that can be measured with reliability.
B) It must be probable that a future sacrifice of economic resources will be required and the liability must be beyond a reasonable doubt.
C) The liability must be beyond a reasonable doubt and the amount of the liability must be able to be recognised reliably.
D) There must have been a past event and there must be a present obligation

Question

Quizplus · Accepted Answer

According to the Conceptual Framework, two criteria must be met before a liability can be recognized in the accounting records. Firstly, it must be probable that any future sacrifices associated with the item will flow from the entity, meaning that it is likely that the entity will have to make a payment or provide some other economic resource in the future. Secondly, the liability must have a cost or value that can be measured with reliability, meaning that the amount of the liability can be determined with a reasonable degree of accuracy. Option B is incorrect because liability only needs to be probable, not beyond a reasonable doubt. Option C is incorrect because beyond a reasonable doubt is not one of the criteria specified in the Conceptual Framework. Option D is not the best choice because although it is one of the criteria, it is only one of the criteria and not both.

What Are the Two Criteria, Specified in the Conceptual Framework