Applying financial reporting standards can be quite complex. The BDO team can help you assess your situation and prepare for the opportunities and challenges involved.
There are three essential characteristics of liabilities:
- They embody a duty or responsibility to others, that leaves a government little or no discretion to avoid settlement of the obligation;
- The duty or responsibility to others entails settlement by future transfer or use of assets, provision of goods or services, or other form of economic settlement at a specified or determinable date, on the occurrence of a specified event or on demand; and
- The transactions or events obligating the government have already occurred.
Liabilities can arise from many types of obligations, such as:
- Agreements and contracts;
- Another government's legislation;
- A government's own legislation;
- Constructive obligations; and
- Equitable obligations.