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Hello Sir, I have a query about the recognition criteria for an asset or liabilty.
Asset definition is “A present economic resource controlled by the entity as a result of past events.”
and recognition criteria for an asset is “An asset is recognised in the balance sheet when it is probable that the future economic benefits will flow to the entity and the asset has a cost or value that can be measured reliably.”
and reference to Qualitative characteristic of financial information
:”
an entity should recognise an asset or a liability (and any related income, expense or changes in equity) if such recognition provides users of financial statements with:relevant information about the asset or the liability and about any income, expense or changes in equity
a faithful representation of the asset or liability and of any income, expenses or changes in equity, and
information that results in benefits exceeding the cost of providing that information.”Therefore my question is if an asset meet the definition of an asset but will still not recognised in the FS if it fails either the recognition criteria for asset and qualitative characteristic? Is it correct ?Thank you.
Is it even an asset meets the recognition criteria to be recognised in the financial statement if its not present faithfully and relevant to the user of the FS,it will still not be recognised? Is it correct?Thank you.
Chapter 5 – Recognition and derecognition. The Conceptual Framework states that only items that meet the definition of an asset, a liability or equity are recognised in the statement of financial position and only items that meet the definition of income or expenses are to be recognised in the statement(s) of financial performance. However, their recognition depends on two criteria: their recognition provides users of financial statements with (1) relevant information about the asset or the liability and about any income, expenses or changes in equity and (2) a faithful representation of the asset or the liability and of any income, expenses or changes in equity. The framework also notes a cost constraint. New to the framework is the discussion of derecognition. The requirements as presented in the framework are driven by two aims: the assets and liabilities retained after the transaction or other event that led to derecognition must be presented faithfully and the change in the entity’s assets and liabilities as a result of that transaction or other event must also be presented faithfully. The framework also describes alternatives when it is not possible to achieve both aims.
https://www.iasplus.com/en/news/2018/03/cf
SO THE OLD FRAMEWORK TALKED ABOUT PROBABILITY – THE NEW ONE DOES NOT. I THINK YOU ARE CONFUSING THE 2 FRAMEWORKS.
So in conclusion that an item need to be meet the definition of asset and meet the two qualitative recognition criteria before recognised in the FS?is it correct?
Thank you.
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