Estimated liability

An estimated liability is an obligation for which there is no definitive amount. Instead, the accountant must make an estimate based on the available data. For example, a warranty reserve is based on an estimate of the number of warranty claims that will be received. Similarly, a defined benefit pension liability is based on multiple estimates of how long employees will live, how long employees will continue to work for the company, and the return on investment of funds set aside for pension payments.

Related Courses

Accountants' Guidebook 
GAAP Guidebook