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"All liabilities" - what does this include?

straw poll

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A set of accounts has current & non-current liabilities on the BS, but also a note for non-cancellable operating leases.

Would you say that the words "all liabilities" include the non-cancellable operating leases, or not?

My office & I say yes, but I'd like to garner as much opinion as possible.

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03rd Jul 2019 09:57

FRS 102 doesn't require the capitalising of assets or the recognition of the liabilities on the balance sheet for operating leases. It does require disclosure of the amounts due.

Or at least that's my reading of the standard, and our approach in the office.

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to Duggimon
03rd Jul 2019 10:10

Is that you leaning towards yes, "all" does include the non-cancelable leases?

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03rd Jul 2019 10:04

What is the context where you want to define 'all liabilities'?

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to paul.benny
03rd Jul 2019 10:09

I'd prefer not to say, but the technicality of it is important, not just a random quiz question.

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to atleastisoundknowledgable...
03rd Jul 2019 10:11

I see, so the question isn't about whether they ought to be on the balance sheet, but whether they ought to be included in some other request to disclose "all liabilities".

I think then without knowing more context it's not answerable.

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to Duggimon
03rd Jul 2019 10:23

What further context do you need?

Sorry I'm being so cryptic / secretive - you know I'm not normally - but I have my reasons.

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to atleastisoundknowledgable...
03rd Jul 2019 11:28

atleastisoundknowledgable... wrote:

What further context do you need?

Sorry I'm being so cryptic / secretive - you know I'm not normally - but I have my reasons.

The "context" is the definition that the person asking for the information applies! Impossible to give a meaningful answer without "context". You're basically saying "does this fall within ANOther's definition of a liability" without telling us how ANOther defines a liability!

In layman's terms, a commitment to make payments in the future would, in my view, be a liability. That may or may not be relevant to your situation.

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to Accountant A
03rd Jul 2019 11:17

I agree.

I am presently sat at an audit client.
They lease their large building. The lease is £350 per year.
The lease term is 999 years from September 1962. There is no break clause.

Total liabilities are therefore £325k on this building. But is this relevant? £300k of these liabilities won't be due until everyone currently on this forum is dead, and their kids dead too. Is this really a liability?

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to thevaliant
03rd Jul 2019 11:26

There is a contract which states "all liabilities" [of the company]. The term is not defined elsewhere in the contract.

Does this help?

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to atleastisoundknowledgable...
03rd Jul 2019 11:35

atleastisoundknowledgable... wrote:

There is a contract which states "all liabilities" [of the company]. The term is not defined elsewhere in the contract.

Does this help?

Assuming there is space to put more than figures, I would decide what number you/your client wishes to disclose and say, for example, "liabilities based on FRSXXX definition are £Y". Or "liabilities, excluding non-cancellable operating leases, are £Z".

Sounds like another case of the person asking for the information not knowing what they want - or not having given it much thought.

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to Accountant A
03rd Jul 2019 11:42

I'd agree with this, you can't really give a single figure for all liabilities without supplying the definition you've used for all liabilities.

It could mean different things to different people, as the examples already mentioned indicate.

Something like "The total amount the company is committed to paying at some point in the future is £X, liabilities per the accounts are £Y and these are calculated with reference to the relevant accounting standards".

What they want could be either of those figures and in many circumstances they will be two different figures.

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to Accountant A
03rd Jul 2019 11:44

Agree. I would stick with referencing a number consistent with the balance sheet.

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03rd Jul 2019 21:01

This is apparently a question in relation to a commercial contract in which the term "all liabilities" appears. It is the lawyers who must tell you what this term means in the context- not a question for accountants. When the lawyers clarify the words, you can do the mathematics.

Lawyers have a habit of thinking that contracts are clear in relation to accounting terms, but as you realise that is frequently not the case

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08th Jul 2019 15:11

If it is reference to a holding company guaranteeing subsidiary liabilities where the subsidiary has not been audited then YES the lease liabilities are part of it, whether on the BS or not.

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