Valuation of Liabilities
Liabilities are generally valued on the balance sheet at either:
- The amount of money needed to pay the debt, or
- The FMV of goods or services to be delivered.
The amount of the liability is usually known, but sometimes the amount must be estimated.
- Service warranties on cars.
- Estimates are based on past experience and anticipated changes in the business environment.
Additional financial statement disclosure may be required.