Componen 5

• Recognition

  Process of incorporating in the balance sheet or income statement an item that meets the definition of an element and satisfies the criteria for recognition
• Criteria for recognition

  1. Probability of future economic benefit

  2. Reliability of measurement
• Probability of future economic benefit


  • Degree of uncertainty that future economic benefits associated with the item will flow to or from the entity
• Reliability of measurement

  • Use of reasonable estimates is an essential part of the preparation of financial statements and does not undermine their reliability
• Recognition of assets

  Recognized when it is probable that the future economic benefits will flow to the entity and the asset has a cost/value that can be measured reliably
• Recognition of liabilities

  Recognized when it is probable that an outflow of resources embodying economic benefits will result from the settlement of the present obligation and the amount at which the settlement will take place can be measured reliably
• Recognition of income

  Increase in future economic benefits related to an increase in asset/decrease of that liability can be measured reliably
• Recognition of expenses

  Decrease in future economic benefits related to decrease in asset/increase of liability can be measured reliably
• Derecognition


  Removal of all or part of a recognised asset or liability from an entity's statement of financial position
• Derecognition of assets


  Occurs when the entity loses control of all or part of the recognised asset
• Derecognition of liabilities


  Occurs when the entity no longer has a present obligation for all or part of the recognised liability