Question

compare and contrast the definition of liability under IASB and FASB and whih one is better and why?

Answer 1

A liability is a present obligation og the enterprise arising from the past events, the settlement of which is expected to result in out flow of resources from the enterprise rmbodying economic benefits. This definition is as per IASB standards.

Liabilities are probabale future sacrificies of economic benefits arising from present events of a particular entity to transfer assets or to provide services to other entities in the future as a result of past transactions or events. This is as per FASB standards.

The definition of liability under IASB is better than the definitionnunder FASB. Because, FASB, board itself conclueing there are many cases where the definitionnis less helpful and thrre are cases even where the question of definition itslef was risen. The following are the problems encountered with the liability definition of FASB.

1. The meaning of term probable in the definition.

2. The need for the term obligating event in the definition

3. Whether the future sacrifices of economic benefits in the definition requires transfer of assets or provision of services.

4. Whether legal, constructive and equitable obligations all should give rise to liabilities.

Hence definitonbof liability as per IASB is better