Concept Statement 5

Question 1

What are the 4 elements that make up the Recognition Criteria?

Answer 1

1) Definition
2) Measurability
3) Relevance
4) Reliability

Question 2

What is the Definition criteria?

Answer 2

Item meets the definition of an element of financial statements

Question 3

What is the Measurability criteria?

Answer 3

Relevant attribute measurable with sufficient reliability

Question 4

What is the Relevance criteria?

Answer 4

information about it is capable of making a difference in our discussions

Question 5

What is the Reliability criteria?

Answer 5

information is representationally faithful, verifiable, and neutral

Question 6

What are the 5 Measurement Attributes

Answer 6

1) Historical Costs
2) Current Costs
3) Market Value
4) Net Realizable Value
5) Present Value of Future Cash Flows

Question 7

What are the requirements to Recognize Revenues & Gains?

Answer 7

1) Realized or Realizable
2) Earned
* Both have to occur to recognize revenue

Question 8

What are the requirements to Recognize Expenses & Losses?

Answer 8

1) Consumption of Economic Benefit
2) Occurrence or discovery of loss of future economic benefits (when future economic benefits cannot be repaid ex: Bad Debt Expense of A/R)

Question 9

What does it mean to be realized?

Answer 9

Revenues are realized when products are exchanged for cash

Question 10

What does it mean to be realizable?

Answer 10

Revenues are realizable when it’s more likely than not that payment will be received

Question 11

What does it mean to be earned?

Answer 11

Revenues are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues