Accounting

When A Liability Is Recognized? | Liability Recognition Criteria

Accounting liabilities :When a Liability is recognized? This question may rise in your mind. But do not worry! Knowledgiate is with you for Accounting Support. Let us explain the liability recognition criteria.

IFRS (International Financial Reporting Standards), Conceptual Framework sets up criteria as to when a liability is recognized (Liability Recognition Criteria) in the accounting records of an entity. In fact, a liability is recognized in the Balance Sheet or statement of financial position, when it is probable that the outflow of resources representing economic benefits would result from settling the present obligation as well as the amount at which the settlement would occur can be measured reliably.

 The term “probable” is used in the recognition of liability as used in the recognition of assets. ‘Probable’ refers to the probability of the outflow of economic benefits being required is likely. The further need for reliable measurement is an effort to measure the liability in monetary terms, the amount of economic benefits that will be given to satisfy or settle the obligation.

All liabilities are not recognized in the accounting records since they do not satisfy the liability recognition criteria as per International Financial Reporting Standards. They may be disclosed in notes to the financial statements, if thought relevant. To know more When a Liability is recognized

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