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ACCA Applied Knowledge · Financial Accounting · Key principles and concepts of accounting

Which of the following best describes when an item that meets the definition of an element should be recognised in the financial statements under the Conceptual Framework?

An item meeting the definition of an element is recognised when recognition gives users relevant information and a faithful representation of it. Cash movement, legal enforceability or an expected sale are not the recognition criteria.

  1. AWhen it is probable that it will be sold within twelve months
  2. BWhen recognition provides relevant information and a faithful representation of the itemCorrect
  3. CWhen cash has been received or paid for the item
  4. DWhen the item has a legal form that can be enforced in court

Explanation

The Framework allows recognition when it provides users with relevant information about the element and a faithful representation of it, subject to cost constraints. Cash receipt or legal form is not required, and expected sale is irrelevant.

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