Group : 6

Name :
Rezkyka Amelia Faisal 1800012099
Auva Ayu Ning Tias 1800012341
Syifah Syofiah 1800012342
CURRENT LIABILITIES,
PROVISIONS AND
CONTINGENCIES
What is a liability?
Defines liabilities as a present obligation of a company
arising from past events, the settlement of which is
expected to result in an outflow from the company of
resources, embodying economic benefits.
What is a liability?
Liability has 3 essential characteristic:
1. It is a present obligation
2. It arises from past eventss
3. It result in an outflow of resources (cash, goods, and
services)
What is a current liability?
Current liabilities are a company's short-term financial
obligations that are due within one year or within a
normal operating cycle. An operating cycle is the time
it takes a company to purchase inventory and convert
it to cash from sales.
What is a current liability?
Current liability is reported if one of two conditions
exists:
1. The liability is expected to be settled within its
normal operating cycle; or
2. The liability is expected to be settled within 12
months after the reporting date

The operating cycle is the period of time elapsing between the acquisition
of goods and services involved in the manufacturing process and the final
cash realization resulting from sales and subsequent collections.
What is a current liability?
Here are some typical current liabilities:
Accounts payable Customer advances and
Notes payable deposits
Current maturities of Unearned revenues
long-term debt Sales taxes payable
Short-term obligations Income taxes payable
expected to be Employee-related
refinanced liabilities
Dividends payable
 PROVISION

Provision is liability of uncertain timing or

amount.

Reported either as current or not-curret

liability.

Common types are :

 Obligations related to litigation.
 Warrantees or product guarantees.
 Business restructurings.
 Environmental damage.
 RECOGNITION OF A
PROVISION

Companies accrue an expense and related

liability for a provision only if the following
three conditions are met :
1. A company has a present obligation (legal
or constructive) as a result of a past event.
2. It is probable that an outflow of resources
embodying economic benefits will be
required to settle the obligation; and
3. A reliable estimate can be made of the
amount of the obligation.
 COMMON TYPES OF
PROVISIONS

Common Types 1. Environmental

are : 2. Onerous
1. Lawsuits contracts
2. Warranties 3. Restructuring
3. Premiums
Contingent liability
Contingent liabilities are not recognized in the financial
statements because they are:
1. A possible obligation
2. A present obligation for which is not probable that
payment will be made; or
3. A present obligation for which a reliable estimate of
the obligation cannot be made
Contingent assets
A contingent assets is a possible asset that arises from
past events and whose existence will be confirmed by
the occurrence or non-occurrence of uncertain future
events not wholly within the control of the company.
Typical contingent assets are:
1. Possible receipts of monies from gifts, donations,
bonuses
2. Possible refunds from the government in tax disputes
3. Pending court cases with a probable favorable
outcome