Chapter 1 - Elements of FS

• What do you call to the groupings into broad classification, of financial effect of an event or transaction?

  Elements of Financial Statement
• What are the elements directly related to the measurement of financial position?

  ALE - Assets, Liabilities, Equity
• What are the elements directly related to measurement of financial performance?

  Income and Expenses
• Asset is a present economic resource controlled by the entity as a result of past events
• What do you mean by economic resource?

  It is the right that has the potential to produce economic benefits
• What helps in identifying the economic resource for which the entity accounts and also the present ability to direct its use and obtain the economic benefit and the right to prevent other entity from doing the same?


  Control
• The following are not considered as an asset of the entity holding them;

  1. Right of access to the public good
  2. Debt instruments and equity instruments issued by the entity and repurchased and held by it
  3. Economic resources under the custody of an agent controlled by the principal
• A liability is a present obligation of an entity to transfer economic resource as a result of past event
• A liability exist if all the following criteria are satisfied

  1. Entity has an obligation
  2. The obligation is to transfer economic resource
  3. The obligation is a present obligation that exists as a result of past events
• What do you call the duty or responsibility of an entity that they have no practical ability to avoid?


  Obligation
• This type of obligation arises if the entity has no practical ability to act inconsistently with an entity's customary practices, published policies, or specific statements. What type of obligation is it?

  Constructive
• What do you call to the residual interest in asset after deducting all the liabilities?


  Equity
• Equity are claim against the entity that does no meet the definition of liability
• It is the amount at which an asset, liability, or equity is recognized in the financial statement


  Carrying Amount
• an entity shall classify an asset as current when it is

  1. expect to realize in its normal operating cycle
  2. held primarily for the purpose of trading
  3. expect to realize within twelve months after the reporting period
  4. cash and cash equivalents unless it is restricted from being exchanged or used to settle liabilities for at least twelve months after the reporting period
• an entity shall classify a liability as current if it is;

  1. expect to settle within its normal operating cycle
  2. holds the liability primarily for the purpose of trading
  3. due to be settled within twelve months after the reporting period
  4. does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period
• Under PAS 32, it is any contract that gives rise to the financial asset of one entity and a financial liability or equity instrument of another entity


  Financial Instrument
• A financial asset is any asset that is

  1. Cash
  2. An equity instrument of another entity
  3. a contractual right to receive cash or another financial asset from another entity
  4. a contractual right to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity
• A financial liability is any liability that is;

  1. a contractual obligation to deliver cash or another financial asset to another entity
  2. a contractual obligation to exchange financial assets or financial liability with another entity under conditions that are potentially unfavorable to the entity