Chapter 6: Scope and Recognition Guidance

Question 1

Accounting Recognition

Answer 1

Broadly describes the criteria, timing, and location (within the financial statements) for recording an item.

Question 2

Fundamental Recognition Criteria

Answer 2

• Definitions: The item meets the definition of an element of financial statements.
• Measurability: It has a relevant attribute measurable with sufficient reliability.
• Relevance: The information about it is capable of making a difference in user decisions.
• Reliability: The information is representationally faithful, verifiable, and neutral.

Question 3

In addition to the Fundamental Recognition Criteria, what are the two additional tests?

Answer 3

• The benefit of recognizing the item must exceed the cost of doing so.
• The item should be considered material to financial statement users.

Question 4

Derecognition Guidance

Answer 4

Describes when and how an asset, liability, or equity item may be removed from the financial statements, and how to determine related gains and losses.