Conceptual Framework for Financial Reporting

5.18
Measurement uncertainty
5.19
Other factors
5.24
DERECOGNITION
5.26
Conceptual Framework
© IFRS Foundation
A51

---

The recognition process
Recognition is the process of capturing for inclusion in the statement of
financial position or the statement(s) of financial performance an item that
meets the definition of one of the elements of financial statements—an asset,
a liability, equity, income or expenses. Recognition involves depicting the item
in one of those statements—either alone or in aggregation with other items—
in words and by a monetary amount, and including that amount in one or
more totals in that statement. The amount at which an asset, a liability or
equity is recognised in the statement of financial position is referred to as its
‘carrying amount’.
The statement of financial position and statement(s) of financial performance
depict an entity’s recognised assets, liabilities, equity, income and expenses in
structured summaries that are designed to make financial information
comparable and understandable. An important feature of the structures of
those summaries is that the amounts recognised in a statement are included
in the totals and, if applicable, subtotals that link the items recognised in the
statement.
Recognition links the elements, the statement of financial position and the
statement(s) of financial performance as follows (see Diagram 5.1):
(a)
in the statement of financial position at the beginning and end of the
reporting period, total assets minus total liabilities equal total equity;
and
(b)
recognised changes in equity during the reporting period comprise:
(i)
income minus expenses recognised in the statement(s) of
financial performance; plus
(ii)
contributions from holders of equity claims, minus
distributions to holders of equity claims.
The statements are linked because the recognition of one item (or a change in
its carrying amount) requires the recognition or derecognition of one or more
other items (or changes in the carrying amount of one or more other items).
For example: 
(a)
the recognition of income occurs at the same time as: 
(i)
the initial recognition of an asset, or an increase in the carrying
amount of an asset; or
(ii)
the derecognition of a liability, or a decrease in the carrying
amount of a liability.
(b)
the recognition of expenses occurs at the same time as: 
(i)
the initial recognition of a liability, or an increase in the
carrying amount of a liability; or
(ii)
the derecognition of an asset, or a decrease in the carrying
amount of an asset.
5.1
5.2
5.3
5.4
Conceptual Framework
A52
© IFRS Foundation

---