An Equitable or Constructive Obligation Arises When

question 50

Multiple Choice

An equitable or constructive obligation arises when:

• A) Social or moral sanctions or custom leaves the entity no realistic alternative other than to make a sacrifice of future benefits.
• B) Management makes a discretionary decision to make a future sacrifice of economic benefits.
• C) Management communicates its decision to commit to the future sacrifice of economic benefits to the parties concerned.
• D) Social or moral sanctions or custom leaves the entity no realistic alternative other than to make a sacrifice of future benefits and management communicates its decision to commit to the future sacrifice of economic benefits to the parties concerned.
• E) All of the given answers.

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Definitions:

Financing Activities

Transactions related to raising capital or repaying investors, such as issuing stocks or bonds and repaying bank loans.

Going Concern

The assumption that a company will continue its operations in the foreseeable future and has no intention of liquidating its assets.

Cash Flows from Operating Activities

The section of the cash flow statement that shows the cash generated or used by a company's primary business activities.

Property Plant and Equipment

Long-term assets used in the operations of a business, not intended for sale, including land, buildings, and machinery.