Page 186 - Finac1 Test 4 Slides

PROVISIONS, CONTINGENT LIABILITIES AND ASSETS

Legal obligations

• This category of obligations means that another party

has the right to summons the entity to perform.

• Such obligations are applicable, for example, when

warranties are given to customers, when such result

from litigation and when self-insurance is applied, and

in the case of onerous contracts.

• The essential element in such cases is therefore an

obligation that can be enforced by law.

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