44 Questions
Which of the following statements is true about recognition in financial statements?
Recognition involves capturing an item that meets the definition of an element of financial statements.
What is the carrying amount of an asset, liability, or equity?
The amount recognized in the statement of financial position.
How are recognized changes in equity during the reporting period calculated?
Income minus expenses recognized in the statement(s) of financial performance, plus contributions from holders of equity claims, minus distributions to holders of equity claims.
Which one of these is an example of a present right or present obligation?
A forward contract
If an entity no longer controls a transferred component, what might be necessary to achieve the aims described in paragraph 5.27?
Retaining exposure to economic benefits
What is one of the procedures described in paragraph 5.28(c) that can support derecognition?
Continuing to recognize
Which of the following statements is true about recognition of items in financial statements?
Recognition of one item requires recognition of other items
What is the purpose of matching costs with income in financial statements?
To include useful information in financial statements
What is the criteria for recognition of items in the statement of financial position?
Items that meet the definition of an asset, liability, or equity
Why does cost constrain recognition decisions in financial reporting?
Recognition decisions are based on the cost of obtaining relevant measures of assets and liabilities
Which of the following is the definition of derecognition?
The removal of all or part of a recognized asset or liability from an entity's statement of financial position
What is the purpose of accounting requirements for derecognition?
To recognize the change in an entity's assets and liabilities resulting from the derecognition
In what cases is derecognition of an asset or liability not appropriate?
When an entity no longer has a transferred component
What might occur if derecognition of a transferred component is not faithfully represented?
The entity's financial position might change more significantly than it has
When may an entity need to provide information about an item in the notes, even if it is not recognized as an asset or liability?
When the item is both uncertain whether it exists and has a low probability of inflows or outflows of economic benefits
What information about an asset or liability may be relevant even if the probability of inflows or outflows of economic benefits is low?
All of the above
Why might the recognition of an asset or liability provide relevant information even if the probability of inflows or outflows of economic benefits is low?
All of the above
What is required for an asset or liability to be recognized?
It must be measured
Which of the following statements is true about estimation in financial information preparation?
Estimates should only be used if they are clearly and accurately described and explained.
When may the level of uncertainty involved in estimating a measure of an asset or liability be so high that it may not provide a faithful representation?
When the estimate is based on cash-flow-based measurement techniques.
What should be done when an asset or liability is subject to high measurement uncertainty and there are different measures available?
A different measure that is slightly less relevant but subject to lower measurement uncertainty should be used.
When may none of the available measures of an asset or liability provide useful information?
When the measures create a recognition inconsistency.
Which of the following is an example of a financial instrument that may give rise to present rights or present obligations?
A forward contract
Under what circumstances might an entity need to continue recognizing a transferred component that it no longer controls?
If derecognition alone is not sufficient to achieve the aims described in paragraph 5.27
What is the purpose of the procedures described in paragraph 5.28(c) in relation to derecognition?
To support derecognition when it is not sufficient to achieve the aims described in paragraph 5.27
Which of the following statements is true about recognition in financial statements?
Recognition involves depicting an item in one of the financial statements in words and by a monetary amount.
What is the purpose of matching costs with income in financial statements?
To ensure that the financial information is relevant and reliable.
What is the carrying amount of an asset, liability, or equity?
The amount at which an item is recognized in the financial statements.
Which of the following statements is true about recognition in financial statements?
Recognition of one item requires the recognition of other items
What is the criteria for recognition of items in the statement of financial position?
Items that meet the definition of an asset, a liability, or equity
Why does cost constrain recognition decisions in financial reporting?
Recognizing an asset or liability incurs costs for preparers and users of financial statements
When may an entity need to provide information about an item in the notes, even if it is not recognized as an asset or liability?
When excluding the item would make the financial statements less complete
Which of the following is a reason why derecognition of an asset or liability may not provide a faithful representation of the entity's financial position?
The entity has transferred an asset but still retains exposure to significant variations in economic benefits
When does derecognition of an asset normally occur?
When the entity loses control of all or part of the recognized asset
What does a complete depiction of an economic phenomenon in financial statements include?
All information necessary for a user to understand the economic phenomenon
Which of the following is one of the aims achieved by accounting requirements for derecognition?
Faithfully representing any assets and liabilities retained after the transaction or event
Which of the following factors may affect the relevance of information provided by recognition in financial statements?
Measurement uncertainty and other factors
When might recognition of an asset or liability provide relevant information even if the probability of inflows or outflows of economic benefits is low?
If the asset or liability is acquired or incurred in an exchange transaction
What is the importance of making information about an item sufficiently visible in the financial statements?
To compensate for the item's absence from the structured summary
When might recognition of an asset or liability not provide a faithful representation of the transaction?
When the asset or liability arises from an event that is not an exchange transaction
Which of the following circumstances may result in a high level of measurement uncertainty for estimating a measure of an asset or liability?
The range of possible outcomes is wide and the probability of each outcome is difficult to estimate.
In which of the following cases would the most useful information be a measure that relies on a highly uncertain estimate?
When the measure is the most relevant measure of the asset or liability.
In limited circumstances, when would an asset or liability not be recognized?
When all available measures of the asset or liability are subject to high measurement uncertainty.
When assessing the recognition of an asset or liability, what factors need to be considered in addition to its description and measurement?
The depiction of resulting income, expenses, and changes in equity.
Understanding Measurement Uncertainty in Financial Information: Test your knowledge on estimating measures and dealing with measurement uncertainty. Learn the importance of reasonable estimates and how to accurately describe and explain them.
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