Recognition and derecognition | Annualreporting.info

Faithful representation

Faithful representation Faithful representation not only relevant information

Appropriate recognition

5.18 Recognition of a particular asset or liability is appropriate if it provides not only relevant information, but also a faithful representation of that asset or liability and of any resulting income, expenses or changes in equity. Whether a faithful representation can be provided may be affected by the level of measurement uncertainty associated with the asset or liability or by other factors.… Read more

Low probability of an inflow or outflow of economic benefits

Existence of assets/Liabilities with low probability of related cash flow

5.15 An asset or liability can exist even if the probability of an inflow or outflow of economic benefits is low (see 1. The probability to produce economic benefits is low in Potential to produce economic benefits and 2. Probability of a transfer of economic benefit is low in Transfer of an economic resource).

Magnitude of the possible cash flows Low probability of an inflow or outflow of economic benefits

5.16 If the probability of an inflow or outflow of economic benefits is low, the most relevant information about the asset or liability may be information about the magnitude of the possible inflows or outflows, their possible timing and … Read more

Relevance

Consider relevancy and irrelevancy

5.12 Information about assets, liabilities, equity, income and expenses is relevant to users of financial statements. However, recognition of a particular asset or liability and any resulting income, expenses or changes in equity may not always provide relevant information. That may be the case if, for example:

  1. it is uncertain whether an asset or liability exists (see Existence uncertainty 5.14); or
  2. an asset or liability exists, but the probability of an inflow or outflow of economic benefits is low (see Low probability of an inflow or outflow of economic benefits 5.15–5.17).

Other factors may complete relevancy

5.13 The presence of one or both of the factors described in Consider relevancy and irrelevancy 5.12 … Read more

Recognition criteria

Meet the definitions

5.6 Only items that meet the definition of an asset, a liability or equity are recognised in the statement of financial position. Similarly, only items that meet the definition of income or expenses are recognised in the statement(s) of financial performance. However, not all items that meet the definition of one of those elements are recognised.… Read more

The recognition process

Inclusion in financial position or financial performance

5.1 Recognition is the process of capturing for inclusion in the statement of financial position or the statement(s) of financial performance an item that meets the definition of one of the elements of financial statements—an asset, a liability, equity, income or expenses. Recognition involves depicting the item in one of those statements—either alone or in aggregation with other items—in words and by a monetary amount, and including that amount in one or more totals in that statement. The amount at which an asset, a liability or equity is recognised in the statement of financial position is referred to as its ‘carrying amount.… Read more