I enter a PO into the the Procurement app, (say SAP Ariba). Say its a ship I am buying for 650m usd. I have negotiate and agreed the contract and terms. I will buy a ship and pay when I take delivery. (ie something significant for the purpose of making a point).
So, 1st Jan I raise a PO and the liability is recorded in the Payables Subledger (Ariba). I have a contract and liable to pay for the ship when complete. Feb, Mar, Apr, May go by and the supplier doesn't give me anything to Goods Receipt or send any invoice for stage payment, so no GRN or Invoice is entered and nothing goes through to the General Ledger. So all this time I don't have anything in my General Ledger to recognise I have committed to buy this ship. There will not be anything on my balance sheet to recognise the liability.
Say during this time I am using my Balance Sheet to show the bank I am good for a new loan, or to investors that the business has a sound capital situation. Then 2 days later the ship is delivered/GRN'ed and 650m usd liability appears.
Its a hypothetical question, I am just interested to find out how payables subledger items should be reported. Maybe its my thinking thats wrong, I am basing it believing a contract when agreed is a commitment.