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Frameworks

1.3 The elements

The Framework identifies five elements of financial statements:

 Assets – resources controlled by an entity from a past event that will lead to a
probable inflow of economic benefits

 Liabilities – obligations of an entity arising from a past event that will lead to a
probable outflow of economic resources

 Equity – the residual net assets of an entity after deducting its liabilities

 Income – increases in economic benefits during the period

 Expenses – decreases in economic benefits during the period.

1.4 Recognition

The Framework says that an item should be recognised in the financial statements if:

 it meets the definition of an element

 it is probable that future economic benefits will flow to or from the entity

 the item can be measured reliably.

The Framework was covered in your previous studies. Further detail on
the rest of its contents can be found in Section 1 of Chapter 1 in your
Study Text.

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