Question

1)The ability to refinance short-term obligations on a long-term basis can be demonstrated if the company has already refinanced those obligations after the date of the balance sheet but before it is issued.

True

False  

2)

Which of the following statements does not describe an essential characteristic of a liability?

The transaction or event obligating the enterprise has already occurred.

The identity of the recipient must be known to the obligated party.

The obligated entity has little or no discretion to avoid the future sacrifice.

A liability is a present obligation that will be settled by a probable future transfer or use of assets.

Answer 1

1. Answer is True

The ability to refinance short-term obligations on a long-term basis can be demonstrated

• If Actual Refinancing after balance sheet date but before issue date (or)
• If Financing agreement noncancellable with Capable Lender

Therefore The ability to refinance short-term obligations on a long-term basis can be demonstrated if the company has already refinanced those obligations after the date of the balance sheet but before it is issued is a true statement.

2.The identity of the recipient must be known to the obligated party is does not described as an essential characteristic of a liability.

Essential of a liabilities are as follows,

1. A liability is a present obligation that will be settled by a probable future transfer or use of assets at a specified or determinable date, on occurrence of a specified event, or on demand.
2. The obligated entity has little or no discretion to avoid the future sacrifice.
3. The transaction or event obligating the enterprise has already occurred.