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Updates from FASB

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Recently, FASB issued a new chapter of its Conceptual Framework w.r.t. recognition and derecognition of an item in the financial statements.

The new chapter becomes Chapter 5 of the FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting. The new chapter sets forth recognition and derecognition criteria and provides guidance on when an item should be incorporated into and removed from the financial statements. It specifies the three criteria; an item should meet to be recognised in the financial statements. These are:

  • Definitions: The item meets the definition of an element of financial statements
  • Measurability: The item is measurable and has a relevant measurement attribute, and
  • Faithful representation: The item can be depicted and measured with faithful representation.

It also sets forth the concept that derecognition, i.e., the process of removing an item from the financial statements of a reporting entity, as an asset, liability or equity should occur, when an item no longer meets any one of the recognition criteria.

To access the text of the new chapter, please click here

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