What are shortfalls of current definition for liabilities

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Recognition of liabilities

It has been argued that many companies' profits are overstated because they fail to take into account the full cost of their operating activities. This is particularly relevant when considering the potential future environmental impact of both production and ultimate disposal of the items they manufacture. Consider the current approach to accounting for liabilities.

Required

A. What are the shortfalls of the current definition for liabilities when applied to potentially negative environmental situations?

B. How might head to profits being overstated?

C. Does it matter that accounting often fails to capture this information?

D. Should we change the definition of liability, and if so how?

E. What would be the broader ramifications for accounting and businesses if we were able to more accurately capture these liabilities?

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Two questions on liabilities regarding environmental damage from the operations of companies are answered. The context is Australia and Australian accounting standards on liabilities and fair value measurement. The concepts of efficient markets, quality of financial reporting etc have also been applied. A PPT of 10 slides has also been prepared. The slides put the essence of the two answers in the form of specific points.

Reference no: EM131812397

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len1812397

1/13/2018 5:21:25 AM

The whole question is divided into 5parts and we need to do only D and E. The whole question is based on AASB13- Recognition of liabilities which has to be linked to sustainability. There has to be minimum 5 refrences for each part and the referncing style is havard. Please be noted intext reference are important.

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