Slide 3 liabilities ifrs

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Current LiabilitiesCurrent Liabilities ProvisionsProvisionsPresentation and Presentation and

AnalysisAnalysis

What is a liability?What is a liability?

What is a current What is a current liability?liability?

RecognitionRecognition

MeasurementMeasurement

Common typesCommon types

DisclosuresDisclosures

Presentation of Presentation of current liabilitiescurrent liabilities

Analysis of current Analysis of current liabilitiesliabilities

Current Liabilities and ContingenciesCurrent Liabilities and ContingenciesCurrent Liabilities and ContingenciesCurrent Liabilities and Contingencies

ContingenciesContingencies

Contingent Contingent liabilitiesliabilities

Contingent assetsContingent assets

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What is a Liability?What is a Liability?What is a Liability?What is a Liability?

Three essential characteristics:

1. Present obligation.

2. Arises from past events.

3. Results in an outflow of

resources (cash, goods,

services).

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What is a Current Liability?What is a Current Liability?What is a Current Liability?What is a Current Liability?

Current liability is reported if one of two conditions exists:

1. Liability is expected to be settled within its normal operating

cycle; or

2. Liability is expected to be settled within 12 months after the

reporting date.

LO 1 Describe the nature, type, and valuation of current liabilities.

The operating cycle is the period of time elapsing between the

acquisition of goods and services and the final cash realization resulting

from sales and subsequent collections.

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Typical Current Liabilities:

Accounts payable.

Notes payable.

Current maturities of long-term debt.

Short-term obligations expected to be refinanced.

Dividends payable.

Customer advances and deposits.

Unearned revenues.

Sales taxes payable.

Income taxes payable.

Employee-related liabilities.


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Portion of bonds, mortgage notes, and other long-term

indebtedness that matures within the next fiscal year.

Exclude long-term debts maturing currently if they are to be:

Current Maturities of Long-Term Debt



1. Retired by assets accumulated that have not been shown

as current assets,

2. Refinanced, or retired from the proceeds of a new debt

issue, or

3. Converted into ordinary shares.

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Exclude from current liabilities if both of the following

conditions are met:

Short-Term Obligations Expected to Be Refinanced


LO 2 Explain the classification issues of short-term debt expected to be refinanced.

1. Must intend to refinance the obligation on a long-term

basis.

2. Must have an unconditional right to defer settlement of

the liability for at least 12 months after the reporting date.

13-8 LO 2


E13-4 (Refinancing of Short-Term Debt): The CFO for

Hendricks Corporation is discussing with the company’s chief

executive officer issues related to the company’s short-term

obligations. Presently, both the current ratio and the acid-test ratio

for the company are quite low, and the chief executive officer is

wondering if any of these short-term obligations could be

reclassified as long-term. The financial reporting date is

December 31, 2010. Two short-term obligations were discussed,

and the following action was taken by the CFO.

Instructions: Indicate how these transactions should be reported

at Dec. 31, 2010, on Hendricks’ statement of financial position.

13-9LO 2 Explain the classification issues of short-term

debt expected to be refinanced.


Short-term obligation A: Hendricks has a $50,000 short-term

obligation due on March 1, 2011. The CFO discussed with its

lender whether the payment could be extended to March 1, 2013,

provided Hendricks agrees to provide additional collateral. An

agreement is reached on February 1, 2011, to change the loan

terms to extend the obligation’s maturity to March 1, 2013. The

financial statements are authorized for issuance on April 1, 2011.

Liability of $50,000

Dec. 31, 2010

Statement Issuance

Apr. 1, 2011

Liability due for payment

Mar. 1, 2011

Refinance completed

Feb. 1, 2011




Short-term obligation A: Hendricks has a $50,000 short-term

obligation due on March 1, 2011. The CFO discussed with its

lender whether the payment could be extended to March 1, 2013,

provided Hendricks agrees to provide additional collateral. An

agreement is reached on February 1, 2011, to change the loan

terms to extend the obligation’s maturity to March 1, 2013. The

financial statements are authorized for issuance on April 1, 2011.

Current Liability of $50,000

Dec. 31, 2010

Since the agreement was not in place as of the reporting

date (December 31, 2010), the obligation should be

reported as a current liability.




Short-term obligation B: Hendricks also has another short-term

obligation of $120,000 due on February 15, 2011. In its discussion

with the lender, the lender agrees to extend the maturity date to

February 1, 2012. The agreement is signed on December 18,

2010. The financial statements are authorized for issuance on

March 31, 2011.

Refinance completed

Dec. 18, 2010

Statement Issuance

Mar. 31, 2011

Liability due for payment

Feb. 15, 2011

Liability of $120,000

Dec. 31, 2010




Short-term obligation B: Hendricks also has another short-term

obligation of $120,000 due on February 15, 2011. In its discussion

with the lender, the lender agrees to extend the maturity date to

February 1, 2012. The agreement is signed on December 18,

2010. The financial statements are authorized for issuance on

March 31, 2011.

Refinance completed

Dec. 18, 2010

Non-Current Liability of $120,000

Dec. 31, 2010

Since the agreement was in place as of

the reporting date (December 31, 2010),

the obligation is reported as a non-

current liability.

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► IFRS requires that the current portion of long-term debt be classified as current unless an agreement to refinance on a long-term basis is completed before the reporting date. U.S. GAAP requires companies to classify such a refinancing as current unless it is completed before the financial statements are issued.

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Bonds PayableBonds PayableLong-Term Long-Term Notes PayableNotes Payable

Special IssuesSpecial Issues

Issuing bondsIssuing bonds

Types and ratingsTypes and ratings

ValuationValuation

Effective-interest Effective-interest methodmethod

Notes issued at face Notes issued at face valuevalue

Notes not issued at face Notes not issued at face valuevalue

Special situationsSpecial situations

Mortgage notes payableMortgage notes payable

ExtinguishmentsExtinguishments

Fair value optionFair value option

Off-balance-sheet Off-balance-sheet financingfinancing

Presentation and analysisPresentation and analysis

Long-Term LiabilitiesLong-Term LiabilitiesLong-Term LiabilitiesLong-Term Liabilities

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Off-balance-sheet financing is an attempt to borrow

monies in such a way to prevent recording the

obligations.

Off-Balance-Sheet FinancingOff-Balance-Sheet FinancingOff-Balance-Sheet FinancingOff-Balance-Sheet Financing

LO 8 Explain the reporting of off-balance-sheet financing arrangements.

Different Forms:

► Non-Consolidated Subsidiary

► Special Purpose Entity (SPE)

► Operating Leases

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Slide 3 liabilities ifrs