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1- part 2 - Coggle Diagram

- - - - When it meets the def of one of the elements
      - If the recognition provides the users with useful info that is relevant and faithful representation
  - - - It does not define the P/L
      - No clarification of the meaning or importance of OCI
      - No distinction between P/L or OCI should be made in practice
    - - SOPL is a primary source of info about the entity's performance
      - All income and expenses are included in the SOPL
      - However, a change in the value of assets and liabilities are included in the OCI if it provides a more useful info
  - - - The expected credit loss model provides relevant information to investors in assessing the likelihood of collection of the contractual cash flows associated with these financial instrument
  - - - The legal form of the lease is that the title to the underlying asset remains with the lessor during the period of the lease
  - - - It is argued that it should not be recognised in the P/L
      - This is because gains and losses reported in one period may then be reversed in a future period, leading to unnecessary fluctuations in reported P/L
      - As the exchange diff. will not be realised until the monetary item is received or settled at some point in the future, some argue that recognising exchange diff in OCI would be more appropriate
    - - This implies that P/L is the default position for reporting gains and losses and therefore IAS 21 is consistent with this
- - - - The item meets the def of an element
      - Recognition of that element provide users of FS with useful info that is relevant and faithful representation of that element
    - - The benefits of the info provided by recognising an element should justify the cost of recognising an element
  - - - Asset
        
        When control is lost
        
        Fully lost
        
        Derecognise whole asset
        
        Partly lost
        
        Derecognise a portion of that asset
      - Liability
        
        When no longer present obligation
    - - Any assets and liabilities retained after derecognition
      - The changes in the entity's assets and liabilities as a result of derecognition
- - - - A profit is earned if the financial (money) amount of net assets or equity at the year end exceeds the beginning, excluding the distributions/contributions from the holders of equity claims
  - - - A profit is made if the physical productive capacity (or operating capability) of the entity at the end of the period exceeds the amount at the beginning, excluding the contributions/distributions from the holder of equity claims
- - - - Intangible assets retains the 2010 CF def. of an asset which specifies that future economic benefits are expected to flow to the entity
      - In the revised CF, an asset is a right with a potential to produce economic benefits
    - - The criteria in standards are more specific than in those CF and are therefore not inconsistent with it
      - The CF is not an IFRS and does not override the requirements of an IFRS
- - - - The diff measurement bases used in the IFRSs
        
        Measurement bases
        
        Two main
        
        Historical cost
        
        It is updated as the asset is consumed or as the liability is settled
        
        If an asset suffers an impairment loss, the historical cost CA is adjusted to reflect that impairment loss
        
        Current value
        
        Uses the info available at the reporting date to update the CA of assets and liabilities
        
        Include
        
        FV
        
        1 more item...
        
        VIU
        
        1 more item...
        
        Fulfilment value
        
        1 more item...
        
        Current cost of an asset
        
        1 more item...
        
        Current cost of a liability
        
        1 more item...
        
        Entry values
        
        Include
        
        Current cost and historical cost
        
        They reflect prices in the market in which the entity would acquire the asset or would incur the liability
        
        Exit values
        
        FV
        
        Reflect the perspective of market participants
        
        VIU & Fulfilment value
        
        Entity specific assumptions
      - The factors to consider in selecting a measurement basis
        
        Nature of info provided
        
        Diff measurement basis will produce diff info
        
        Therefore it is important to consider what info will be produced when applying that specific measurement basis in both SOFP and SOPL
        
        Usefulness of info provided
        
        Relevance of info is affected by
        
        How the asset/liability contributes to future cash flows
        
        For example, historical or current cost might provide relevant info for asset which indirectly contribute to future cash flows when used in combination with other assets
        
        The characteristics of the asset or liability
        
        Example, if the value of the asset is subject to market fluctuations then FV may be more relevant than historical cost
        
        Faithful representation is affected by
        
        Measurement inconsistency
        
        Using diff measurement bases for related assets and liabilities can contribute to measurement inconsistencies (accounting mismatch)
        
        More useful info may be provided by selecting the same measurement bases for related assets and liabilities
        
        Measurement uncertainty
        
        This occurs when the measure must be estimated and cannot be observed in the active market
        
        High level of measurement uncertainty may result in info that is not a faithful representation
        
        Other factors
        
        Cost constraint
        
        Do the benefits of info provided by the selected measurement basis justify the cost?
        
        Enhancing qualitative characteristics
        
        Consistently using the same measurement basis aids comparability
        
        Verifiability is enhanced by using measures that can be independently corroborated (verified)
    - - Individual IFRS standards specify which particular measurement basis should be used
      - Therefore, the measurement basis in CF will mainly be used by IASB to develop IFRS
      - However, preparers of accounts can use the measurement principles to help them choose a measurement basis where a choice is offered in standard
- - - - Focusing on the objective and principles rather than on rules
      - Classifying info by grouping similar items and separating dissimilar items
      - Aggregating info appropriately so that it is not obscured by unnecessary detail or excessive aggregation
    - - Primary source of info about the entity's performance
      - In developing standards, IASB will
        
        In principle, require all income and expenses to be included in the SOPL
        
        But may decide that income or expenses arising from a change in the current value of an asset or liability should be classified as OCI
        
        This should be the exception and only where it provides more relevant info or a more faithful representation
      - OCI is reclassified to P/L in a future period if doing so results in a provision of more relevant info or a more faithful representation
        
        However, for some items, there is no clear basis for determining when the appropriate future period would be, then that items should not be reclassified to P/L