All of the Following Are Criteria That Financial Reporting Requires

question 25

Multiple Choice

All of the following are criteria that financial reporting requires before recognizing an obligation as a liability except:

• A) The transaction or event that gave rise to the obligation has already occurred.
• B) The firm has a present obligation and little or no discretion to avoid the transfer.
• C) The firm must know the precise amount of the obligation before recording it.
• D) The obligation involves a probable future sacrifice of economic benefits-a future transfer of cash, goods, or services; the forgoing of a future cash receipt; or the transfer of equity shares-at a specified or determinable date.The firm can measure with reasonable precision the cash-equivalent value of the resources needed to satisfy the obligation.

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Definitions:

Corporations

Legal entities that are separate and distinct from their owners, with the rights to own property, sue or be sued, and conduct business.

States

Defined territorial areas within a country, each with its own government and regulatory powers.

Corporation

A legal entity that is separate and distinct from its owners, who are shareholders; it has rights, privileges, and liabilities independent of those of its members.

Owners

Individuals or entities that legally possess, control, and derive benefits from property or a business.