- CFA Exams
- CFA Level I Exam
- Study Session 7. Financial Reporting and Analysis (2)
- Reading 22. Understanding Balance Sheets
- Subject 1. Components and Format of the Balance Sheet
CFA Practice Question
Which of the following statements about liability is false?
A. Cash dividends should be recorded as a liability when they are declared by the board of directors.
B. Payroll taxes withheld from employees' payroll cheques should never be recorded as a liability since the employer will eventually remit the amounts withheld to the appropriate taxing authority.
C. A company may exclude a short-term obligation from current liabilities if the firm intends to refinance the obligation on a long-term basis and demonstrates an ability to complete the refinancing.
Explanation: The definition of a liability includes payroll taxes since the company is obligated to make the payments to the government at some point in the future, after the expenses are incurred.
User Contributed Comments 2
| User | Comment |
|---|---|
| Lamkerst | such strong words as ALWAYS, NEVER, NO, etc are suspisious |
| meeravenk | Answered this by process of elimination |