Question

The presentation of current and noncurrent liabilities in the statement of financial position:

A. is shown only on GAAP financial statements.
B. includes contingent liabilities under IFRS.
C. is always shown with current liabilities reported first in an IFRS statement of financial position.
D. is shown on both a GAAP and an IFRS statement of financial position.

Answer 1

The presentation of current and noncurrent liabilities, including contingent liabilities, is a feature of both GAAP and IFRS financial statements. Current liabilities are generally reported before noncurrent liabilities in these statements.

Step-by-step explanation:

The presentation of current and noncurrent liabilities in the statement of financial position includes contingent liabilities under IFRS and is a common feature in both GAAP and IFRS financial statements. It is not exclusive to GAAP financial statements as option A suggests. Current liabilities are typically reported before noncurrent liabilities in an IFRS statement of financial position, which aligns with option C of the student's question.

In both GAAP and IFRS financial statements, liabilities are broadly categorized as either current (expected to be settled within 12 months) or noncurrent (expected to be settled beyond 12 months). Contingent liabilities, which are potential liabilities that may arise depending on the outcome of a future event, are required to be reported in financial statements if the occurrence is probable and the amount can be reasonably estimated.