Conceptual Framework for Financial Reporting

Other factors
Faithful representation of a recognised asset, liability, equity, income or
expenses involves not only recognition of that item, but also its measurement
as well as presentation and disclosure of information about it (see Chapters
6–7).
Hence, when assessing whether the recognition of an asset or liability can
provide a faithful representation of the asset or liability, it is necessary to
consider not merely its description and measurement in the statement of
financial position, but also:
(a)
the depiction of resulting income, expenses and changes in equity. For
example, if an entity acquires an asset in exchange for consideration,
not recognising the asset would result in recognising expenses and
would reduce the entity’s profit and equity. In some cases, for
example, if the entity does not consume the asset immediately, that
result could provide a misleading representation that the entity’s
financial position has deteriorated.
(b)
whether related assets and liabilities are recognised. If they are not
recognised, recognition may create a recognition inconsistency
(accounting mismatch). That may not provide an understandable or
faithful representation of the overall effect of the transaction or other
event giving rise to the asset or liability, even if explanatory
information is provided in the notes.
(c)
presentation and disclosure of information about the asset or liability,
and resulting income, expenses or changes in equity. A complete
depiction includes all information necessary for a user of financial
statements to understand the economic phenomenon depicted,
including all necessary descriptions and explanations. Hence,
presentation and disclosure of related information can enable a
recognised amount to form part of a faithful representation of an
asset, a liability, equity, income or expenses.
5.22
5.23
5.24
5.25
Conceptual Framework
© IFRS Foundation
A57

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