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Chapter 13 - Chapter13 Current Liabilities and...

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Chapter13: Current Liabilities and Contingencies Chapter Opener p. 690 /// OVERVIEW With the discussion of investments in Chapter 12 , we concluded our six-chapter coverage of assets that began in Chapter 7 . Chapter 13 is the first of six chapters devoted to liabilities. Here we focus on short-term liabilities. Bonds and long-term notes are discussed in Chapter 14 . Obligations relating to leases, income taxes, pensions, and other postretirement benefits are the subjects of the following four chapters. In Part A of this chapter, we discuss liabilities that are classified appropriately as current. In Part B we turn our attention to situations in which there is uncertainty as to whether an obligation really exists. These are designated as loss contingencies. /// LEARNING OBJECTIVES After studying this chapter, you should be able to: LO 1 Define liabilities and distinguish between current and long-term liabilities. (page 692 ) LO 2 Account for the issuance and payment of various forms of notes and record the interest on the notes. (page 695 ) LO 3 Characterize accrued liabilities and liabilities from advance collection and describe when and how they should be recorded. (page 697 ) LO 4 Determine when a liability can be classified as a noncurrent obligation. (page 702 ) LO 5 Identify situations that constitute contingencies and the circumstances under which they should be accrued. (page 706 ) LO 6 Demonstrate the appropriate accounting treatment for contingencies, including unasserted claims and assessments. (page 706 ) LO 7 Discuss the primary differences between U.S. GAAP and IFRS with respect to current liabilities and contingencies. (page 704 and 716 ) p. 691 FINANCIAL REPORTING CASE
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Dinstuhl’s Dad My dad is confused,” your friend Buzz Dinstuhl proclaimed at the office one morning. “You see, we're competing against each other in that investment game I told you about, and one of his hot investments is Syntel Microsystems. When he got the annual report yesterday afternoon, he started analyzing it, you know, really studying it closely. Then he asked me about this part here.” Buzz pointed to the current liability section of the balance sheet and related disclosure note: Note 3: Short-Term Borrowings (in part) The components of short-term borrowings and their respective weighted average interest rates at the end of the period are as follows: The Company maintains bank credit lines sufficient to cover outstanding short-term borrowings. As of December 31, 2011, the Company had $200.0 million fee-paid lines available. At December 31, 2011 and 2010, the Company classified $65.0 million and $78.0 million, respectively, of commercial paper and bank notes as long-term debt. The Company has the intent and ability, through formal renewal agreements, to renew these obligations into future periods.
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