Controller Library Value Pack
CFO Library Value Pack

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    Accounting Dictionary

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    Financial Liability

    Under international financial reporting standards, a financial liability can be either of these two items:

    1. A contractual obligation to deliver cash or similar to another entity or a potentially unfavorable exchange of financial assets or liabilities with another entity.
    2. A contract probably to be settled in the entity's own equity and that is a nonderivative under which the entity may delivery a variable amount of its own equity instruments, or a derivative that probably will be settled other than through the exchange of cash or similar for a fixed amount of the entity's equity.

    Examples of financial liabilities are accounts payable, loans issued by an entity, and derivative financial liabilities.