According to the AASB the present definition of liabilities 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.

Some commentators have suggested that a companys profits may be overstated due to this definition because the full cost of operations are not taken into account. Further it may be argued that potential future impacts on the environment on both production of produces and the eventual disposal of manufactured items are ignored.

Considering the current approach to accounting for liabilities explain the following.

1. What are the shortfalls of the current definition for liabilities when applied to potentially negative environmental situations? (Explain in 10 Sentence)
2. How might this lead to profits being overstated? (Explain in 5 Sentence)
3. Does it matter that accounting often fails to capture this information? Explain why. (Explain in 10 Sentence)
4. What would be the broader ramifications for accounting and businesses if we were able to more accurately capture these liabilities? (Explain in 10 Sentence)