Income is recognised in the income statement when an increase in future economic benefits related to an increase in an asset or a decrease of a liability has arisen that can be measured reliably. This means, in effect, that recognition of income occurs simultaneously with the recognition of increases in assets or decreases in liabilities
The definition of income as encompassing both revenue and gains is very broad, being based in effect, on statement of financial position (balance sheet) movements. The elements of the statement of financial position (assets, liabilities and equity) are defined first in the IFRS Framework, before the elements of the statement of comprehensive income. Therefore, the statement of comprehensive income is derived from the statement of financial position(according to a strict interpretation of the Framework). This is known as the asset/liability model. Theoretically this means that once an asset is recognised or a liability reduced or derecognised, under the Framework’s asset/liability model, income is recognised simultaneously. AASB 15/IFRS 15 Revenue from contracts with Customers gives similar definition of income as the conceptual framework and they should arrive at the same outcome.
Reference: paragraph 92/IFRS15
2. What is the 'asset/liability model for the definition and recognition of income under the conceptual...
3. What are the recognition criteria for income under the conceptual framework? How do these differ from the key stated purpose of AASB 15/IFRS 15?
GAAP and IFRS have their own “Conceptual Frameworks” for financial accounting. - What roles does IASB’s Conceptual Framework play? Is it different from the FASB? - What are the contents of IASB’s conceptual frameworks? Is it different from the FASB? Note: see the 2018(new) Conceptual Frameworks.
What does the Conceptual Framework state about derecognition? A. For an asset, derecognition normally occurs when the entity loses control of all or part of the recognized asset B. For a liability, derecognition normally occurs when the entity no longer has a present obligation for all or part of the recognized liability C. Derecognition is the removal of all or part of a recognized asset or liability from an entity's statement of financial position D. All of the above
The Conceptual Framework defines liabilities and outlines a number of criteria for their recognition. a-Forden and a-Holden Custom Cars Ltd identifies the following items: (a) Purchased tyres, glass and steel on account. (b) Received $100 000 in deposits for custom cars to be built in the next financial period. (c) Employed two new staff members and agreed to pay them $75 000 per annum. They begin work next week. (d) One of a-Forden and a-Holden Custom Cars Ltd’s customers is...
The Conceptual Framework defines liabilities and outlines a number of criteria for their recognition. a-Forden and a-Holden Custom Cars Ltd identifies the following items: (a) Purchased tyres, glass and steel on account. (b) Received $100 000 in deposits for custom cars to be built in the next financial period. (c) Employed two new staff members and agreed to pay them $75 000 per annum. They begin work next week. (d) One of a-Forden and a-Holden Custom Cars Ltd’s customers is...
Exercise 1.12 Definition and recognition criteria Explain how T Ltd should account for the following items, justifying your answer by reference to the definitions and recognition criteria in the conceptual framework. Also state, where appropriate, which ledger accounts should be debited and credited. Required Photographs of the company’s founders, which are of great sentimental and historical value. (a) T Ltd has been sued for negligence — likely it will lose the case. (b) T Ltd has been sued for negligence...
is it asset sensitive or liability sensitive? under what scenario for market interest rates will sparkle gain in net interest income ?, loss in net income ? i need answers for these three question please, thanks in advance Sparkle Savings Association has interest-sensitive assets of $400 million, interest-sensitive liabilities of $325 million, and total assets of $500 million. What is the bank's dollar interest- sensitive gap? What is Sparkle's relative interest-sensitive gap? What is the value of its interest-sensitivity ratio?...
Computation of deferred taxes under IFRS is slightly different from GAAP. For example, in the United Kingdom (which follows IFRS), companies use the crystallization approach. An equivalent concept in the United States is “realization.” The concept underlying this “crystallization” approach is that companies recognize deferred income taxes only if the taxes are expected to crystallize. Therefore, if liability is deferred indefinitely, then the present value of that liability is zero. No deferred tax liability is recognized if the accumulated deferred...
4] ROK decided to replace an existing asset with a newer model. Two years ago, the existing asset originally cost $30,000 and has been depreciated under MACRS using a 5-year recovery period (Le., 20%12.. Iomhliszt LLS2hS70%. The esisting asset can be sold for S25.000 after 2-year use. The new asset will cost $75,000 plus $5,000 for shipping and installation. The new asset will be depreciated under MACRS using a S-year recovery period. In addition, ROK expects that the new asset...
QUESTIONS 1. What is a conceptual framework? Why is a conceptual frameworke ry in financial accounting? 2. What is the primary objective of financial reporting? 3. What is meant by the term qualitative characteristics of accounting informat "? 4. Briefly describe the two fundamental qualities of useful accounting information 62 Chapter 2 Conceptual Framework for Financial Reporting 5. How is materiality for immateriality) related to the proper presentation of financial statements? What factors and mesures should be considered in essing...