Recognition Criteria of Expenses and Assets in Advanced Financial Accounting
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Added on Β 2023/01/20
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This article discusses the recognition criteria of expenses and assets in advanced financial accounting, including the differences with the conceptual framework. It also provides references for further reading.
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Running head: ADVANCED FINANCIAL ACCOUNTING Advanced financial accounting Name of the student Name of the university Student ID Author note
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1ADVANCED FINANCIAL ACCOUNTING Contents Part A...............................................................................................................................................2 Recognition criteria of expenses and assets in accordance with AASB 6...................................2 Difference with the definition and recognition criteria as per conceptual framework................3 Reference.........................................................................................................................................4
2ADVANCED FINANCIAL ACCOUNTING Part A Recognition criteria of expenses and assets in accordance with AASB 6 As defined in AASB 6, the exploration and evaluation assets as per exploration and evaluation expenses recognized as the asset in compliance with the accounting policy of the entity (Aasb.gov.au, 2019). As per Para Aus7.1 of AASB 6, accounting policy of an entity with regard to the treatment of exploration and evaluation expenses shall be in compliance with the below mentioned requirements. Further, for each of the interest, the expenses carried out in exploration for as well as evaluating the mineral resources shall be β ο·Fully or partially capitalized and shall be recognized as the exploration and the evaluation asset if the requirement of Para 7.2, as mentioned below is satisfied (Aasb.gov.au, 2019). ο·Expensed as and when incurred Further, the entity shall separately take this decision for each of the interest area. As per Para Aus7.2, the exploration and the evaluation asset must be reported only with regard to the interest area if the below mentioned conditions are satisfied β ο·Rights to the tenure of interest area are present (Aasb.gov.au, 2019). ο·One of the below mentioned conditions at least shall be met β I.Evaluation and exploration activities in interest area at the closing of reporting period have not reached at the level that permits the reasonable assessment for existence or
3ADVANCED FINANCIAL ACCOUNTING otherwise of the reserves those are recoverable economically and considerable operations in and active or in association with the interest area are continuing II.Evaluation and exploration expenses are projected to be recouped through the successful exploitation and development of the interest area or alternatively by the sale (Zhou, Birt & Rankin, 2015). Difference with the definition and recognition criteria as per conceptual framework As per the conceptual framework, asset is defined as the present economic resource that is controlled by the entity owing to the past events. As per Para 89 of conceptual framework asset is reported under thebalance sheet while it is apparent that future economic advantages from the asset will be inflow for the entity and the value or cost of the asset can be reliably measured. Further, the asset is reported when the expenses carried out for which the same is considered as improbable that the economic benefit will be inflow for the entity beyond the current accounting period. Rather, such transaction resulting into recognition of the expenses in the income statement (Aasb.gov.au, 2019). Hence, there are differences in the definition of asset as per AASB 6 and as per conceptual framework. As per AASB asset is recognized as per the entityβs accounting policy whereas as per conceptual framework asset is defined as the present economic resource that is controlled by the entity owing to the past events. As per AASB 6 asset is recognized only for the area of interest whereas as per conceptual framework the asset is reported when it is apparent that future economic advantages from the asset will be inflow for the entity and the value or cost of the asset can be reliably measured (Xie, 2015).
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