Accounting Basics—Assets, Liabilities—to Get Definition Updates

U.S. accounting rulemakers on Wednesday put the finishing touches on updated definitions of key financial terms that they hope will help them set consistent new accounting standards.

The Financial Accounting Standards Board settled on a new definition of a liability as a “present obligation of an entity to transfer an economic benefit.” The definition FASB published in 1985 was overly complicated and included the phrase “probable future sacrifices,” which wasn’t consistent with the rest of U.S. generally accepted accounting principles, FASB Chair Richard Jones said.

The new definition of a liability won’t change current accounting ...