Scope
All entities in accounting for liabilities, provisions, contingent assets and liabilities and commitments, except for:
- Income taxes Employee benefits Financial instruments that are valued at fair value Estimates for asset valuation Share-based payments
What is a liability?
A liability is the set, or quantifiable segment, of the present obligations of an entity, virtually unavoidable, to transfer assets or provide services in the future to other entities, as a consequence of past transactions or events.
A present obligation is the condition resulting in any liability to transfer resources or provide services in the future to another entity. Said transfer may be subject to the expiration of a period, the occurrence of a specific event or the simple request for compliance by the beneficiary.
Consequence of past transactions or events. The obligation arises from an event in the past, not from transactions that will occur in the future.
Event that gives rise to the obligation. Event from which a payment obligation arises, legal or assumed by the entity, so that it has no alternative but to satisfy the corresponding amount.
A legal obligation is one that derives from:
- A contract Legislation Another legal cause.
An assumed obligation derives from a pattern of behavior established in the past, by published policies or sufficiently specific statements, the entity has declared to third parties that it will accept certain responsibilities.
Probable. The chance of the future event occurring is high.
Possible. The eventuality of the future event occurring is more than remote, but less than likely.
Remote. The chance of the future event occurring is low.
Accounts payable to suppliers. They are liabilities for goods or services that have been received by the entity and, in addition, have been the subject of invoicing or formal agreement with the supplier.
Accounts payable for accumulated obligations. They are liabilities for the receipt of services or benefits accrued at the balance sheet date, or for taxes applicable to the period ended on that date. Although it is sometimes necessary to estimate the amount or maturity of accumulated obligations, the uncertainty associated with them is, in general, much less than in the case of provisions.
What are provisions?
Provisions are liabilities in which their amount or maturity are uncertain.
A provision should be recognized only when:
- There is a present obligation (legal or assumed) resulting from a past event in charge of the entity. It is probable that the outflow of economic resources will occur as a means to settle said obligation. The obligation can be reasonably estimated.
If the three conditions mentioned above are not met, the provision should not be recognized.
Provisions - Valuation rules
NIF C9 liabilities, provisions, assets and contingent liabilities
Provisions - Valuation rules
Provisions must be reviewed on each balance sheet date and adjusted, where appropriate, to reflect the best estimate existing at that time.
The provision must be reversed if it is no longer probable that the outflow of economic resources will be required to settle the obligation.
Changes in the estimates of provisions must be treated in accordance with the provisions of NIF B-1, Accounting changes and error corrections.
Contingent asset
A possible economic benefit that arises from past events, the existence of which must be confirmed only by the occurrence or, where appropriate, by the lack of occurrence of one or more uncertain events in the future that are not entirely under the control of the entity.
Recognizing a contingent asset could mean recognizing revenue that may never be realized. Contingent assets must be subject to constant evaluation, so that in the event that the incorporation of economic benefits to the entity becomes practically certain, income and assets are recognized, since they no longer have the contingent character.
Contingent assets are not recorded until they cease to be contingent.
Contingent liability
A possible obligation, arising from past events, the existence of which must be confirmed only by the occurrence or, where appropriate, by the lack of occurrence of one or more uncertain events in the future that are not entirely under the control of the company. entity.
Contingent liabilities are not recorded until the outflow of resources is probable, and in that case, a provision is recorded.
Contingent liabilities - Valuation rules
NIF C9 liabilities, provisions, assets and contingent liabilities
Commitments
They represent agreements made to carry out certain actions in the future, which do not meet the requirements to be considered liabilities, provisions or contingencies.
The main difference between commitments and contingencies is that the former do not imply the materialization of a cost or loss resulting from past events (long-term lease contracts, assets given as collateral for loans, obligation to comply with some contract clauses credit, such as maintaining certain financial ratios).
Commitments are not recorded, they are only disclosed when they are important and derive from contractual obligations.
Presentation rules
- The part of the long-term liability, which over time becomes payable within the next twelve months or within the normal cycle of operations, is converted to short-term Significant debit balances that are part of the accounts for payments to suppliers, must be reclassified as accounts receivable or as inventories, depending on their origin or the final application that is estimated to have. Liabilities in favor of affiliated companies that come from purchases of goods, provision of services, loans, etc., must be presented separately, since the nature of the beneficiary gives these liabilities a special characteristic in terms of their enforceability. Liabilities in favor of shareholders or officials must also be presented separately, if they are significant.
