Question

An entity's commitment to an exit or disposal plan, by itself, is not enough to result in liability recognition. What other criteria must be met?

Answer 1

An entity's commitment to an exit or disposal plan alone is not enough for liability recognition. Several criteria must be met, including the existence of a detailed plan, high probability of implementation, and ability to measure the liability reliably.

Step-by-step explanation:

In order for an entity's commitment to an exit or disposal plan to result in liability recognition, there are several criteria that must be met:

1. Existence of a detailed plan: The entity must have a well-defined and detailed plan outlining how the exit or disposal will be carried out.
2. High probability of implementation: The plan must have a high probability of being implemented successfully. This means that there is a strong likelihood that the entity will be able to meet its commitments and fulfill the plan.
3. Ability to measure the liability reliably: The entity must have the ability to measure the liability associated with the exit or disposal plan reliably. This requires having sufficient information and data to estimate the financial impact of the plan.

Only when all these criteria are met can an entity recognize a liability related to an exit or disposal plan.