Please use your own words to rewrite these sentences below: Applicable Professio
ID: 2587838 • Letter: P
Question
Please use your own words to rewrite these sentences below:
Applicable Professional Pronouncements 1. Paragraph 36 of Statement of Financial Accounting Concepts No. 6: A liability has three essential characteristics: (a) it embodies a present duty or responsibility to one or more other entities that entails settlement by probable future transfer or use of assets at a specified or determinable date, on occurrence of a specified event, or on demand, (b) the duty or responsibility obligates a particular entity, leaving it little or no discretion to avoid the future sacrifice, and (c) the transaction or other event obligating the entity has already happened.
2. Paragraph B18 of the Basis for Conclusions of Interpretation 48: Liabilities are required to be recognized when the obligating event has occurred. For current income tax liabilities, the obligating event is the generation of taxable income. Generally, income tax systems are founded on the principles of compliance, self-assessment, and self-reporting. That is, a taxpayer computes its taxable income and related tax liability and reports that information to taxing authorities as required by law. The enforcement powers of the taxing authority are secondary to the self-assessment and self-reporting requirements.
Explanation / Answer
Liability can be defined as where a person/entity has present obligation or any obligation which may arise in future or trigerred at occurence of particular event in fututre which is certain to pay/settle the obligation either by way of payment in cash or transfer of asset.
2.Liabilities are recognised generally when the event due to which obligation arises occur.(i.e., occurence of liability becomes certain) We categorise our current income tax payable as liability when there is generation of income which attracts tax liability.
Generally in income tax system its the duty of taxpayer to determine its taxable income(i.e., self assessment ) and tax liability and report the same to tax authorities (self reporting) after which the tax authorities can levy and recover further.