Page 81 - Microsoft Word - 00 IWB ACCA F7.docx

A conceptual and regulatory framework

2.3 Definitions

 Asset

– resource controlled by the entity as a result of past events

– expected to result in an inflow of economic benefit

 Liability

– present obligation as a result of a past event

– expected to result in an outflow of economic benefit

 Equity

– residual interest in assets after deducting all liabilities

 Income

– increases in economic benefits in the form of inflows

– or enhancements of assets or decreases of liabilities

 Expenses

– decreases in economic benefits in the form of outflows

– or depletions of assets or incurrences of liabilities

You need to learn these definitions.

2.4 Recognition

In order to be recognised, an item that meets the definition of an element must also
meet the following criteria:

 a probable flow of economic benefit is associated with the element

 the element can be measured reliably.

75