中南财经政法大学：《中级会计学 Intermediate Accounting》课程电子教案（PPT课件讲稿，英文版）Chapter 10 Current Liabilities And Contingencies

10 Current Liabilities And Contingencies ntermediate Accounting Accounting School. Zhongnan

10 Current Liabilities And Contingencies Accounting School ·Zhongnan University of Economics & Law ntermediate Accounting I 中级会计学

1. Conceptual Overview of Liabilities Liabilities are probable future sacrifices of economic benefits arising from present obligations of a company to transfer assets or provide services to other entities in the future as a result of past transactions or events

1. Conceptual Overview of Liabilities Liabilities are probable future sacrifices of economic benefits arising from present obligations of a company to transfer assets or provide services to other entities in the future as a result of past transactions or events. Intermediate Accounting 10 Current Liabilities And Contingencies

Three essential characteristics ofa liability 1. It involves a present duty or responsibility of the company to one or more entities that will be settled by the probable future transfer or use of assets at a specified or determinable date. on occurrence of a specific event, or on demand 2. The duty or responsibility obligates theAN company, leaving it little or no discretion to avoid the future sacrifice 3. The transaction or other event obligating the company has already happened

Three Essential Characteristics of a Liability 1.It involves a present duty or responsibility of the company to one or more entities that will be settled by the probable future transfer or use of assets at a specified or determinable date, on occurrence of a specific event, or on demand. 2.The duty or responsibility obligates the company, leaving it little or no discretion to avoid the future sacrifice. 3.The transaction or other event obligating the company has already happened. Intermediate Accounting 10 Current Liabilities And Contingencies

Primary liabilities Issues 1. Identification ofliabilities--the detection of a company's obligations 2. Measurement or valuation of the liabilities and the related expense-the determination of an amount to attach to each obligation and to match as an expense against revenues Reporting on the financial statements-the specific disclosures in both the company's financial statements and the related notes

Primary Liabilities Issues 1. Identification of liabilities—the detection of a company’s obligations. 2. Measurement or valuation of the liabilities and the related expense—the determination of an amount to attach to each obligation and to match as an expense against revenues. 3. Reporting on the financial statements—the specific disclosures in both the company’s financial statements and the related notes. Intermediate Accounting 10 Current Liabilities And Contingencies

2. Nature and definition of current Liabilities or the creation of other current liabilities within one year or an operating cycle, whichever is longer

2. Nature and Definition of Current Liabilities Current liabilities are obligations whose liquidation is expected to require the used of existing current assets... …or the creation of other current liabilities within one year or an operating cycle, whichever is longer. Intermediate Accounting 10 Current Liabilities And Contingencies

Operating Cycle Inventory as Receivables

Operating Cycle Cash Inventory Receivables Intermediate Accounting 10 Current Liabilities And Contingencies

Liquidity Liquidity refers to how quickly a liability can be paid, or its nearness to cash

Liquidity Liquidity refers to how quickly a liability can be paid, or its nearness to cash. Intermediate Accounting 10 Current Liabilities And Contingencies

Ways ofReporting liquidity 1. Classify current liabilities and assets(mixture of operating-cycle and maturity-date approach) 2. Classify current liabilities and assets using the"pure operating-cycle approach 3. Classify current liabilities and assets under the maturity-date approach only 4. Adopt a different classification scheme, possibly using more classes 5. Leave the balance sheet unclassified but arranging items in order of liquidity

Ways of Reporting Liquidity 1. Classify current liabilities and assets (mixture of operating-cycle and maturity-date approach). 2. Classify current liabilities and assets using the “pure” operating-cycle approach. 3. Classify current liabilities and assets under the maturity-date approach only. 4. Adopt a different classification scheme, possibly using more classes. 5. Leave the balance sheet unclassified but arranging items in order of liquidity. Intermediate Accounting 10 Current Liabilities And Contingencies

Liquidity Ratios o Cash flows to total debt 2 Net income to total assets(return on total assets ratio 3 Total debt to total assets a Current assets to current liabilities (current ratio) s Cash to current liabilities

Liquidity Ratios  Cash flows to total debt.  Net income to total assets (return on total assets ratio).  Total debt to total assets.  Current assets to current liabilities (current ratio).  Cash to current liabilities. Intermediate Accounting 10 Current Liabilities And Contingencies

Types of current liabilities Having contractual Amount Accounts payable Notes payable Currently maturing portion of long- term debt Dividends payable Advances and refundable deposits Accrued items Unearned items

Types of Current Liabilities Having Contractual Amount Accounts payable Notes payable Currently maturing portion of long￾term debt Dividends payable Advances and refundable deposits Accrued items Unearned items Intermediate Accounting 10 Current Liabilities And Contingencies