Conceptual Framework for Financial Reporting

Assets and liabilities
Unit of account
The unit of account is the right or the group of rights, the obligation or the
group of obligations, or the group of rights and obligations, to which
recognition criteria and measurement concepts are applied.
A unit of account is selected for an asset or liability when considering how
recognition criteria and measurement concepts will apply to that asset or
liability and to the related income and expenses. In some circumstances, it
may be appropriate to select one unit of account for recognition and a
different unit of account for measurement. For example, contracts may
sometimes be recognised individually but measured as part of a portfolio of
contracts. For presentation and disclosure, assets, liabilities, income and
expenses may need to be aggregated or separated into components.
If an entity transfers part of an asset or part of a liability, the unit of account
may change at that time, so that the transferred component and the retained
component become separate units of account (see paragraphs 5.26–5.33).
A unit of account is selected to provide useful information, which implies
that:
(a)
the information provided about the asset or liability and about any
related income and expenses must be relevant. Treating a group of
rights and obligations as a single unit of account may provide more
relevant information than treating each right or obligation as a
separate unit of account if, for example, those rights and obligations:
(i)
cannot be or are unlikely to be the subject of separate
transactions;
(ii)
cannot or are unlikely to expire in different patterns;
(iii)
have similar economic characteristics and risks and hence are
likely to have similar implications for the prospects for future
net cash inflows to the entity or net cash outflows from the
entity; or
(iv)
are used together in the business activities conducted by an
entity to produce cash flows and are measured by reference to
estimates of their interdependent future cash flows.
(b)
the information provided about the asset or liability and about any
related income and expenses must faithfully represent the substance
of the transaction or other event from which they have arisen.
Therefore, it may be necessary to treat rights or obligations arising
from different sources as a single unit of account, or to separate the
4.48
4.49
4.50
4.51
Conceptual Framework
A46
© IFRS Foundation

---

rights or obligations arising from a single source (see paragraph 4.62).
Equally, to provide a faithful representation of unrelated rights and
obligations, it may be necessary to recognise and measure them
separately.
Just as cost constrains other financial reporting decisions, it also constrains
the selection of a unit of account. Hence, in selecting a unit of account, it is
important to consider whether the benefits of the information provided to
users of financial statements by selecting that unit of account are likely to
justify the costs of providing and using that information. In general, the costs
associated with recognising and measuring assets, liabilities, income and
expenses increase as the size of the unit of account decreases. Hence, in
general, rights or obligations arising from the same source are separated only
if the resulting information is more useful and the benefits outweigh the
costs.
Sometimes, both rights and obligations arise from the same source. For
example, some contracts establish both rights and obligations for each of the