Definition and Recognition Flashcards
What are the four problems/ criticsisms of the conceptual framework
too ambiguous and open to interpretation
too descriptive
the meaning of faithful representation is problematic
inconsistencies with accounting standards cast doubt upon the efficacy of the framework
example of the conceptual framework being too ambiguous and open to interpretation
Fair value - if there is nothing to directly compare an asset to, measurement techniques can be subjective
Materiality - limited guidance on how to define materiality. What may be considered material to one organisation may be viewed differently by another
definition criteria for property plant and equipment under AASB116
as items that are held for use in the production or supply of goods or services, rental to others or for administrative purpose, and expected to be used for more than one period (para. 6).
recognition criteria for property plant and equipment under AASB116
Recognition criteria (para. 7):
a) It is probable that future economic benefits will flow to the entity; and
b) The cost of the item can be measured reliably.
definition criteria for an asset under conceptual framework
a present economic resource controlled by the entity as a result of past events.
recognition criteria for an asset under conceptual framework
if it satisfies the definition of an asset (para. 5.6) and recognition of the item as an asset provides users of financial statements with (para. 5.7):
a)relevant information about the asset and about any resulting income or change in equity; and
b)a faithful representation of the asset and about any resulting income or change in equity.
What to write for definition
Is it an asset, liability, expense or income? Apply the relevant framework/ standard
Recognition criteria under CF?
Recognise an item meeting the definition if such recognition provides users with:
a) relevant information about the asset or liability and about any income, expenses or changes in equity
b) a faithful representation of the asset or liability and of any income, expenses or changes in equity
Definition of a liability under CF?
a present obligation of the entity to transfer an economic resource as a result of past events
Definition of equity under CF?
Equity is the residual interest in the assets of the entity after deducting all its liabilities
Definition of income under CF?
Income is increases in assets, or decreases in liabilities, that result in increases in equity, other than those relating to contributions from holders of equity claims.
Definition of expense under CF?
Expenses are decreases in assets, or increases in liabilities, that result in decreases in equity, other than those relating to distributions to holders of equity claims.
What is an economic resource under CF?
An economic resource is a right that has the potential to produce economic benefits.
What is the 5 step framework model for AASB 15?
Identify the contract(s) with a customer
Identify the performance obligations in the contract
Determine the transaction price
Allocate the transaction price to the performance obligations in the contract
Recognise revenue when (or as) the entity satisfies a performance obligation.
