A liability involves the past, the present, and the future. It is a present responsibility, to sacrifice assets in the future, caused by a transaction or other event that already has happened. Specifically, “Elements of Financial Statements,” Statement of Financial Accounting Concepts, which describes three essential characteristics: 1. Are probable, future sacrifices of economic benefits. 2. That arises from present obligations (to transfer goods or provide services) to other entities. 3. That result from past transactions or events