Exam 8: Liabilities and Owners Equity

Which of the following should definitely be recognised as a liability under the IASB Framework? i.Share dividend declarations ii.Cash dividend declarations iii.Convertible notes

Liabilities are present obligations of an entity,whereas owners' equity is a residual interest or claim but not an obligation to transfer assets.

Which of these possible methods for settling liabilities involves the outflow of assets by the entity?

The entity view of accounting was formulated in response to the shortcomings of the proprietary view concerning the separate legal status of a company.

A physical capital rather than a financial capital view is appropriate under proprietary theory.

It is correct that:

The most commonly used measurement method for liabilities is:

Even if a liability meets the Framework definition it still should not be recognised if the amount at which the settlement will take place cannot be measured reliably.

The statement that is true in respect of appropriations is:

Do frequent flyer points give rise to a liability for an airline? Discuss.

With respect to the IASB Framework's definition of a liability,and in particular the requirement for a present obligation,which of the following items would be recognised as liabilities? i.An employee has accrued 2 months worth of long service leave with the company ii.An employee has fallen ill and has accrued 12 days of sick leave which she will now use iii.An employee has worked for the company for six years and has accrued 25 days sick leave

Which of these items would not meet the definition of a liability under the IASB Framework and the current accounting standards? i.A provision for uninsured losses ii.An unconditional purchase obligation iii.Accrued long service leave.