I - Financial Liabilities: General principles

1. Definitions

1.2. General definitions

Financial liabilities include any contractual liability to pay cash or other financial assets, e.g. bank overdrafts, trade payables, loans payable.

(IAS 32, par 11)

A financial liability is any liability that is:

1. 1. a contractual obligation:
      1. to deliver cash or another financial asset to another entity; or
      2. to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity; or
   2. a contract that will or may be settled in the entity’s own equity instruments and is:
      1. a non-derivative for which the entity is or may be obliged to deliver a variable number of the entity’s own equity instruments; or
      2. a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity’s own equity instruments. For this purpose the entity’s own equity instruments do not include instruments that are themselves contracts for the future receipt or delivery of the entity’s own equity instruments.

(IAS 37, par 10)

A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.

A legal obligation is an obligation that derives from:

1. 1. a contract (through its explicit or implicit terms);
   2. legislation; or
   3. other operation of law.

A constructive obligation is an obligation that derives from an entity’s actions where:

1. 1. by an established pattern of past practice, published policies or a sufficiently specific current statement, the entity has indicated to other parties that it will accept certain responsibilities; and
   2. as a result, the entity has created a valid expectation on the part of those other parties that it will discharge those responsibilities.

(IAS 37, par 11(b))

Accruals are liabilities to pay for goods or services that have been received or supplied but have not been paid, invoiced or formally agreed with the supplier, including amounts due to employees (for example, amounts relating to accrued vacation pay, sums due in respect of outstanding leave).

They must be recognised at the same time as the corresponding expense for the service received or the recognition of the good purchased but not invoiced.

1.2. Detailed Definitions

• Trade payables
  • For Goods and Services: Debts (within one year) that are generated by the entity’s industrial and commercial operations that relate to the purchase and delivery of goods and services.
  • For Fixed Assets: CAPEX suppliers.

Supplier: Most of the liabilities recognised in this line item are legal obligations incurred when buying goods, assets and services or liabilities vis-à-vis the State. Advances received to provide services or products are also recognised and presented as liabilities.

• Other short-term payables: Short-term miscellaneous liabilities (within one year) that arise from an entity's operations, and that are not related to trade or financial creditors. They include payroll and social security, tax-related liabilities, other payables within one year, prepaid income.
• Other non-current financial liabilities: Long-term debts (more than one year) generated by an entity’s industrial and commercial operations, in respect of purchases and deliveries of goods and services.
• Dividends payable: Debts arising from distribution agreements, income from investments, and shareholders’ equity transfers received/paid.
• Income taxes payable: Estimated tax on income and on capital (wealth) owned by or to an entity.
• Short-term borrowings: Total amount of debts falling due within one year and arising from internal loans granted by other companies to finance its activity without increasing its shareholders' equity.
• Internal financial current accounts (Liabilities): Total amount of internal bank account positions towards consolidated companies.