SFAC 5 essentially confirmed existing practice in both of these areas. The question of measurement involves two choices: (1) the choice of a unit of measurement, and (2) the choice of an attribute to be measured. The concept statement does not address specific recognition issues. These obviously are very general guidelines. The information is representationally faithful, verifiable, and neutral. The information about it is capable of making a difference in user decisions. The item has a relevant attribute measurable with sufficient reliability. Definition.The item meets the definition of an element of financial statements.But, when should the revenue event be recorded, and at what amount? RECOGNITIONĪccording to SFAC 5, an item should be recognized in the basic financial statements when it meets the following four criteria, subject to a cost effectiveness constraint and materiality threshold: For example, a revenue was previously defined as an inflow of assets from selling a good or providing a service. is the process of associating numerical amounts to the elements. Measurement process of associating numerical amounts to the elements. refers to the process of admitting information into the basic financial statements. Recognition process of admitting information into the basic financial statements. Now that the various elements of financial statements have been identified, we discuss when they should be recognized (recorded) and how they should be measured. Please change your browser preferences to enable javascript, and reload this page. You must have javascript enabled to view this website.
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