Accounting for Liabilities: Conceptual Issues, Standard Setting, and Evidence from Academic Research

TLDR

Understanding current liability accounting problems and related research can guide GAAP improvement and stimulate further academic inquiry. The paper aims to summarize conceptual issues in liability accounting, highlight standard problems, and identify opportunities for refinement and research insights. The authors review conceptual issues in liability accounting, critique current standards, and discuss empirical research evidence and future research opportunities.

Abstract

In this paper, we summarize conceptual issues that arise in the definition, recognition, derecognition, classification, and measurement of liabilities. We also highlight problems in existing accounting standards for liabilities and identify opportunities to refine those standards. Where relevant, we describe evidence from empirical accounting research involving liabilities and identify opportunities for future research. Our objective is to highlight the inconsistencies and controversies surrounding existing accounting standards for liabilities, and to describe the research evidence that provides insights into accounting for liabilities. A better understanding of the current problems in accounting for liabilities and the related research evidence should help standard setters and their constituents in their attempts to improve GAAP, and should stimulate future academic research to shed new light on accounting for liabilities.