Liability Accounting and Disclosure Under GAAP

On Demand Webinar

Webinar Details $219

  • Rated:
  • Webinar Length: 100 Minutes
  • Guest Speaker:   Chuck Borek
  • Topic:   Taxation and Accounting
  • Credit:   CPE 2.0, ATATX 1.5
All Access Membership

Proper reporting of liabilities on GAAP-based financial statements is crucial to an informed assessment of the financial condition of an enterprise. Overstatement of misclassification of liabilities can result in missed opportunities for financing and artificially low valuations, while liability understatement could result in claims of fraudulent financial reporting. The amount reported as a liability directly affects the equity balances and is therefore a crucial component of the balance sheet. In this course we will identify the potential areas of concern in liability reporting and cover the basic strategies necessary to appropriately reflect those items. 

Specifically, the course will help you to:

  • Distinguish between debt and equity instruments
  • Select the proper classification of liabilities on a classified balance sheet
  • Recognize non-debt components such as interest and other current charges
  • Identify the proper accounting for debt refinancing
  • Determine when a contingent liability must be accrued
  • Recognize the appropriate disclosure requirements for a contingent liability

Level: Intermediate
Format: Recorded webcast
Instructional Method: QAS Self Study
NASBA Field of Study: Accounting
Program Prerequisites: None
Advance Preparation: None

  1. Introduction
  2. FASB Definition Of Liability 00:02:33
  3. Definition Of Debt 00:03:18
  4. Long-Term Liabilities 00:03:50
  5. Bond Basics 00:04:34
  6. Reading A Corporate Bond Listing 00:07:45
  7. Payments vs. Accrual 00:10:46
  8. Valuation Of Bonds Payable 00:12:56
  9. Calculating a Bond’s Value (Selling Price) 00:15:53
  10. Calculating a Bond’s Value (Selling Price) Cont’d 00:16:37
  11. Accounting For Bonds Issued At Discount 00:19:53
  12. Accounting For Bonds Issued At Discount Cont’d 00:22:15
  13. Accounting For Bonds Issued At Premium 00:24:10
  14. Accounting For Bonds Issued At Premium Cont’d 00:25:28
  15. The Effective Interest Method 00:27:06
  16. Effective Interest Method with Bonds Issued At A Discount 00:27:57
  17. Schedule of Bond Amortization 00:29:57
  18. Schedule of Bond Amortization -  Journal Entry On Date Of Issue 00:31:34
  19. Schedule of Bond Amortization - Record First Payment And Amortization of The Discount 00:32:29
  20. Schedule of Bond Amortization - Record Accrued Interest And Amortization Of The Discount 00:32:52
  21. Effective Interest Method With Bonds Issued At A Discount 00:33:14
  22. Schedule Of Bond Amortization 00:34:30
  23. Schedule of Bond Amortization -  Journal Entry On Date Of Issue 00:
  24. Schedule of Bond Amortization - Record First Payment And Amortization of The Discount 00:34:55
  25. Classification Of Bond Discount/Premium and Issuance Costs 00:36:34
  26. Long-Term Debt Disclosures 00:38:30
  27. Long-Term Debt Disclosures Cont. 00:41:06
  28. Short-Term Debt Disclosures (SEC) 00:41:37
  29. Debt vs. Equity 00:42:06
  30. Basic Balance Sheet Concept 00:42:24
  31. Importance of Classification 00:43:20
  32. Three Reasons Issuers Prefer Equity to Debt 00:44:31
  33. Accounting Standards Codification Topic 480 00:47:30
  34. ASC 480 Basic Approach 00:48:20
  35. ASC 480: Three Considerations for Debt 00:49:19
  36. ASC 480: Appropriate Unit of Accounting 00:51:19
  37. ASC 480: Requirement to Transfer Cash 00:52:49
  38. ASC 480: Debt is Unconditional (Usually) 00:53:07
  39. Debt That Does Not Look Like Debt 00:53:51
  40. ASC 480: Debt That Does Not Look Like Debt - Mandatorily Redeemable Financial Instruments 00:54:12
  41. ASC 480: Debt That Does Not Look Like Debt - Obligations to Repurchase Equity 00:55:43
  42. ASC 480: Debt That Does Not Look Like Debt - Obligations to Issue a Variable Number of Equity Shares 00:58:17
  43. Non-Debt Components of Debt 00:57:53
  44. Interest 00:58:11
  45. Non-Interest Carrying Charges 01:00:27
  46. Forms of Ownership 01:01:09
  47. Classified Balance Sheets 01:06:21
  48. Current Liabilities vs. Non-Current Liabilities 01:06:25
  49. Business Time Horizon 01:06:49
  50. Current Liabilities 01:08:56
  51. Non-Current Liabilities 01:10:28
  52. Current Ratio - Advantages and Disadvantages 01:11:09
  53. Quick Ratio 01:13:16
  54. Debt Refinancing 01:14:21
  55. Reasons to Refinance Debt 01:14:35
  56. Basic Classifications of Refinancing 01:15:10
  57. Basic Classifications of Refinancing Cont’d 01:15:31
  58. Troubled Debt Restructuring 01:18:35
  59. Journal Entries for Debt Restructuring 01:19:59
  60. Troubled Debt Restructurings 01:21:59
  61. Recent Changes: ASU 2022-02 01:23:50
  62. ASU 2022-02 Application 01:24:17
  63. ASU 2022-02 Modification Disclosures 01:24:33
  64. ASU 2022-02 Default Disclosures 01:24:44
  65. ASU 2022-02 Disclosures (General) 01:24:53
  66. Contingent Liability Accrual 01:24:58
  67. FASB ASC 450.20 -  Remote 01:25:54
  68. FASB ASC 450.20 -  Probable 01:26:14
  69. FASB ASC 450.20 -  Reasonably Possible 01:26:22
  70. FASB ASC 450.25-2 01:26:52
  71. FASB ASC 450.50-3 01:27:27
  72. Summary - Ingnore 01:27:32
  73. Summary -Accrue 01:27:44
  74. Summary - Disclose 01:27:48
  75. The Lawyer’s Letter and Disclosure of Contingent Liabilities 01:28:51
  76. What Does “Probable” Mean? 01:31:33
  77. What Does “Remote” Mean? 01:32:42
  78. ABA Perspective on Disclosure 01:33:45
  79. But . . . 01:34:19
  80. ABA Statement of Policy 01:35:08
  81. ABA: Items That May Be Addressed 01:36:16
  82. Restrictions on Lawyers Audit Letters 01:37:32
  83.  Scope Limitation on Responses 01:38:08
  84. Limitation as to Materiality 01:39:11
  85. Information Lawyer May Provide 01:39:37
  86. ABA Statement of Policy 01:40:08
  87. Attendee Questions 01:41:23
  88. Presentation Closing 01:42:16
  • Accounting Standards Codification (ASC) 480 00:47:32
  • Accounts Payable (AP) 01:10:17
  • Amortization 00:22:44, 00:25:54, 00:27:56, 00:34:35
  • Asset 00:02:47, 00:43:04, 00:57:11, 01:05:04, 01:07:48
  • Audit 00:02:27, 01:28:50
  • Balance Sheet (BS) 00:45:11, 01:06:22
  • Bond Indenture 00:05:04
  • Bonds and Coupons (B&C) 00:05:50
  • Bonds Payable 00:03:56, 00:22:15, 00:25:23, 00:32:45, 00:35:07
  • Common Stock 01:01:26
  • Contact 00:04:47, 00:09:03, 00:11:01, 00:13:10, 00:19:34, 00:27:48
  • Cryptocurrency 01:04:39
  • Dividends 01:09:00
  • Effective Interest Method 00:27:04
  • Equity 00:42:06, 00:44:36, 00:48:06, 00:53:25, 01:15:39
  • Expenditure 01:09:59
  • Expense 00:35:40, 01:09:10
  • FASB - Financial Accounting Standards Board 00:02:33, 00:41:35, 00:48:10, 01:25:14
  • Financial Statement 00:38:41, 01:28:04, 01:34:29
  • Generally Accepted Accounting Principles (GAAP) 00:01:13, 00:02:36, 00:11:51, 00:55:04, 01:25:55, 01:31:41
  • Income Statement  00:44:19
  • Interest 00:05:29, 00:07:09, 00:10:49, 00:22:19, 00:58:11
  • Inventory 01:11:56
  • Liability 00:01:11, 00:02:34, 00:40:53, 00:53:06, 01:07:35, 01:10:17, 01:14:29, 01:27:13
  • Mutual Fund Shares 01:03:55
  • Notes Payable 00:04:05, 01:10:15
  • Preferred Stock 01:01:26
  • Present value (PV) 00:16:40, 00:28:56
  • Renevue 01:09:34
  • Straight Line Amortization 00:26:52

Accounting Standards Codification (ASC) 480: Accounting Standards Codification (ASC) 480, Distinguishing Liabilities from Equity topic, contains one subtopic: ASC 480-10, Overall, which provides guidance on how an issuer classifies and measures financial instruments with characteristics of both liabilities and equity.

Accounts Payable (AP): The amount of money a company owes creditors (suppliers, etc.) in return for goods and/or services they have delivered.

Amortization: An accounting term that refers to the process of allocating the cost of an intangible asset over a period of time. It also refers to the repayment of loan principal over time. (investinganswers.com)

Asset: Property owned by a person or company, regarded as having value and available to meet debts, commitments or legacies.

Audit: A formal examination of an organization's or individual's accounts or financial situation

Balance Sheet (BS): A financial report that summarizes a company's assets (what it owns), liabilities (what it owes) and owner or shareholder equity at a given time.

Bond Indenture: A bond indenture agreement is a contract or legal document that records the obligations of the bond issuer and the benefits that will be given to the bondholder. A bond indenture may also be called a bond resolution, a bond contract, or a deed of trust.

Bonds Payable: Bonds payable is a liability account that contains the amount owed to bond holders by the issuer. This account typically appears within the long-term liabilities section of the balance sheet, since bonds typically mature in more than one year.

Bonds and Coupons (B&C): A bond is a form of debt investment and is considered a fixed income security. An investor, whether an individual, company, municipality or government, loans money to an entity with the promise of receiving their money back plus interest. The “coupon” is the annual interest rate paid on a bond.

Common Stock: Common stock is a class of stock that represents equity ownership in a corporation. Owners of common stock, called shareholders, are entitled to the following rights: Voting rights to elect the members of the board of directors. Typically, shareholders may cast one vote per share.

Contract: A written or spoken agreement, especially one concerning employment, sales, or tenancy, that is intended to be enforceable by law.

Cryptocurrency: A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange wherein individual coin ownership records are stored in a digital ledger or computerized database using strong cryptography to secure transaction record entries, to control the creation of additional digital coin records, and to verify the transfer of coin ownership.

Dividends: A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits. When a corporation earns a profit or surplus, the corporation is able to re-invest the profit in the business and pay a proportion of the profit as a dividend to shareholders.

Effective Interest Method: The Effective Interest Method is a technique used for amortizing bonds to show the actual interest rate in effect during any period in the life of a bond before maturity. It is based on the bond's book value at the beginning of any given accounting period.

Equity: The total value of your business after you’ve subtracted what you owe [“liabilities”] from what you own [“assets”].

Expenditure: An expenditure is money spent on something. Expenditure is often used when people are talking about budgets.

Expense: Offset (an item of expenditure) as an expense against taxable income.

FASB - Financial Accounting Standards Board: The Financial Accounting Standards Board is a private standard-setting body whose primary purpose is to establish and improve Generally Accepted Accounting Principles within the United States in the public's interest.

Financial Statement: Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. ... A balance sheet or statement of financial position, reports on a company's assets, liabilities, and owners equity at a given point in time.

Generally Accepted Accounting Principles (GAAP): A set of rules and guidelines developed by the accounting industry for companies to follow when reporting financial data. Following these rules is especially critical for all publicly traded companies.

Income Statement: One of the three primary financial statements used to assess a company's performance and financial position (the two others being the balance sheet and the cash flow statement). The income statement summarizes the revenues and expenses generated by the company over the entire reporting period. (investinganswers.com)

Interest : Interest is the charge for the privilege of borrowing money, typically expressed as annual percentage rate (APR). Interest can also refer to the amount of ownership a stockholder has in a company, usually expressed as a percentage.

Inventory: A company's inventory typically involves goods in three stages of production: raw goods, in-progress goods, and finished goods that are ready for sale. Inventory or stock refers to the goods and materials that a business holds for the ultimate goal of resale, production or utilization.

Liability: In financial accounting, a liability is defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future.

Mutual Fund Shares: Unlike stock, mutual fund shares do not give their holders any voting rights. A share of a mutual fund represents investments in many different stocks or other securities. The price of a mutual fund share is referred to as the net asset value (NAV) per share, sometimes expressed as NAVPS.

Notes Payable: Notes payable are long-term liabilities that indicate the money a company owes its financiers—banks and other financial institutions as well as other sources of funds such as friends and family. They are long-term because they are payable beyond 12 months, though usually within five years.

Preferred Stock: Preferred stock is a component of share capital that may have any combination of features not possessed by common stock, including properties of both an equity and a debt instrument, and is generally considered a hybrid instrument.

Present Value (PV): The current value of a future sum of money based on a specific rate of return. Present value helps us understand how receiving $100 now is worth more than receiving $100 a year from now, as money in hand now has the ability to be invested at a higher rate of return. See an example of the time value of money here.

Revenue: In accounting, revenue is the income that a business has from its normal business activities, usually from the sale of goods and services to customers. Revenue is also referred to as sales or turnover. Some companies receive revenue from interest, royalties, or other fees.

Straight Line Amortization: Straight-line amortization is a way of calculating debt repayment where a company allocates the same amount of interest for each payment until it repays the debt in full.


Guest Speaker

  • Chuck Borek

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