The Financial Accounting Standards Board is proposing a new chapter in its conceptual framework discussing the recognition and derecognition of an item in financial statements.
FASB's conceptual framework contains a set of interrelated objectives and fundamentals to provide the board with a useful tool as it sets standards.
A Statement of Financial Accounting Concepts is nonauthoritative and doesn't establish or change GAAP, but it can be useful in guiding how standard-setters and accountants alike think about the items in financial statements.
The
The proposed chapter spells out the recognition and derecognition criteria and guidance on when an item should be incorporated into and removed from financial statements. FASB asked Tuesday for stakeholders to offer feedback on three proposed recognition criteria an item should meet to be recognized in financial statements, depending on the usual cost constraint and materiality considerations. Those proposed criteria include:
- 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.
FASB is looking for comments on whether derecognition — the process of removing an item from financial statements of a reporting entity as an asset, liability or equity — should happen when an item no longer meets any one of the recognition criteria.
The proposed chapter, including information on how to submit comments to FASB, can be
