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Conceptual framework - Coggle Diagram
Conceptual framework
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Definition, Recognition, and Measurement of The
Elements from which Financial Statements are constructed
Definition
- The financial position elements are assets, liabilities, and equity. Assets are resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. Liabilities are obligations of the entity arising from past events, the settlement of which is expected to result in an outflow of economic resources. Equity represents the residual interest in the assets of the entity after deducting liabilities.
- The performance elements are income and expenses. Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants. Expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants. Capital maintenance adjustments are changes in equity resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners. These adjustments include revaluation/restatement of assets and liabilities, which give rise to increases/decreases in equity.
Recognition
- Recognition is the process of incorporating an item that meets the definition of an element and satisfies the criteria for recognition in the balance sheet or income statement. An item that meets the definition of an element should be recognized if it is probable that any future economic benefit associated with the item will flow to or from the entity and the item has a cost or value that can be measured with reliability.
Measurement
- Measurement is the process of determining the monetary amounts at which the elements of the financial statements are to be recognized and carried in the balance sheet and income statement. The measurement can be based on historical costs, current costs, realizable value, or present value.
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