What is a Liability?

Have you ever got out of bed in the morning and wondered what is a liability? While I haven't but maybe you have.

A Liability is defined in section 1000.33 of the CICA handbook.

A liability must represent three things:
1. A highly profitable future sacrifice of assets or services.
2. Constituting a present obligation.
3. The result of a past transaction or event
(summarized by Thomas Beechy)

There are two types of liabilities:

1. Financial Liability: which is a financial instrument (which is a contract that gives rise to a financial asset of one party and a financial liability or equity of another party) (CICA 3855.17.a).

2. Non-financial Liability: is defined appropriately as what is NOT a financial liability :). This may include unearned or deferred revenue or estimated liabilities/expenses anticipated to arise in the future.