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DipIFRS ACCA course - IAS1 Recognition of the elements of financial statements No.10

DipIFRS ACCA course - IAS1 Recognition of the elements of financial statements No.10


Recognition is the process of including:

1. Balance sheet.
2. An Income statement.
A clause that meets the definition of an element and meets the following criteria for recognition:
1. It is possible that any future economic benefit associated with this item will flow to or from the entity
2. The cost or value of the component can be measured reliably.

Based on these general criteria:

An asset is recognized (Asset) in the balance sheet when it is probable that future economic benefits will flow to the entity and the asset has:
1. Cost.
2. Or a value.
Can be measured reliably.
and Derecognition of the asset is excluded when the company loses control of that asset !!


Where companies lose control over assets in several ways, such as:


1. Write-offs. This is when future economic benefits cannot be expected from the use of the asset, and thus it is disposed of
2. Transfers Or donation.
3. Sale.
A liability is recognized in the balance sheet when it is probable that the outflow of resources embodying economic benefits will result from the settlement of a present obligation and the amount by which the settlement will be effected can be measured reliably.
The liability is excluded (Derecognition) when the company gets rid of it !!


Income is recognized in the income statement when there is an increase in future economic benefits related to:
1. An increase in an asset.
2. A decrease in a liability.
It can be measured reliably.


Expenses are recognized when there is a shortfall in future economic benefits related to:
1. A decrease in an asset.
2. An increase of a liability.
and when it can be measured reliably.



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