Chapter 11 - Current Liabilities and Contingencies

3 key elements of liabilities

present obligation, arising from past event, future outflow of economic benefits

financial liabilities

contractual obligation to deliver cash/financial asset to another party

contractual obligations

enforceable and legally binding

non financial liabilities

not financial liabilities and settled through delivery of G/S

measurement of financial liabilities at FVPL

initially and subsequently measured at FV

measurement of other financial liabilities

initially measured at FV less transaction costs, subsequently measured at amortized cost

measurement of non-financial liabilities

generally settled through delivery of G/S

current liabilities

obligations that are expected to be settled within 1 year of BS or business’ normal operating cycle

sales tax payable

non financial obligations, vendors required to collect GST/HST/PST

notes payable

supported with written promise to pay and specifies details

notes payable can be

interest bearing, non-interest bearing, < 90 days, > 90 days

deferred revenue

non financial obligations arising from collection of assets that haven’t been earned

standard for customer loyalty programs

revenue recognition

recognition for customer loyalty programs

initial recognition of deferred revenue and award revenue when points redeemed, distinct PO from originating revenue, recognized OT

measurement for customer loyalty programs

allocate transaction price to PO on standalone basis, recognize award revenue in proportion of points expected to be redeemed

2 similarities of customer loyalty programs

gives customer material right to future G/S for free/discount, underlying transaction involves 2 POs

2 POs of customer loyalty programs

current PO to fulfill terms of sale and future PO to meet loyalty program

non-current debt in default and loan becomes payable on demand

reclassify as current liability

non-current debt in default and lender provides grace period before YE < 12 months

reclassify as current liability

non-current debt in default and lender provides grace period before YE > 12 months

keep as non-current liability

non-current debt in default and lender provides grace period after YE but before FS issue

reclassify as non-current and disclose grace period