In accordance with the conceptual framework, income is recognised in the statement of profit or loss and other comprehensive income when:*1 pointan increase in future economic benefits relating to a decrease in an asset or an increase in a liability can be measured reliably.an increase in future economic benefits relating to an increase in an asset can be measured reliably.an increase in future economic benefits relating to an increase in an asset or a decrease in a liability can be measured reliably.a decrease in future economic benefits relating to a decrease in an asset or an increase in a liability can be measured reliably.
Question
In accordance with the conceptual framework, income is recognised in the statement of profit or loss and other comprehensive income when:*1 pointan increase in future economic benefits relating to a decrease in an asset or an increase in a liability can be measured reliably.an increase in future economic benefits relating to an increase in an asset can be measured reliably.an increase in future economic benefits relating to an increase in an asset or a decrease in a liability can be measured reliably.a decrease in future economic benefits relating to a decrease in an asset or an increase in a liability can be measured reliably.
Solution
The correct answer is: an increase in future economic benefits relating to an increase in an asset or a decrease in a liability can be measured reliably.
Here's why:
The Conceptual Framework for Financial Reporting defines income as increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants.
So, income is recognised in the statement of profit or loss and other comprehensive income when there is an increase in future economic benefits (which can be in the form of an increase in assets or a decrease in liabilities) and this increase can be measured reliably.
The other options are incorrect because they either only partially cover the definition of income (i.e., only relating to an increase in an asset or a decrease in a liability, not both) or they refer to a decrease in future economic benefits, which would not result in income, but rather an expense.
Similar Questions
In accordance with the conceptual framework, income is recognised in the statement of profit or loss and other comprehensive income when:*1 pointa present obligation of the entity arising from past events, the settlement of which is expected to result in an inflow to the entity of resources embodying economic benefits.a possible obligation of the entity expected to arise from future events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.possible obligation of the entity, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
Expenses are recognised in the statement of profit or loss and other comprehensive income when:*1 pointa decrease in future economic benefits related to a decrease in an asset or an increase in a liability can be measured reliabily.increase in future economic benefits related to a increase in an asset or an increase in a liability can be measured reliably.a decreae in futhere economic benefits related to a decrease in an asset or a decrease in a liability can be measured reliably.non of the options are correct.
The recognition of income does not occur at the same time as: Reading required: Learning objective 16.4.1 on page 527Group of answer choicesissue of sharesan increase in the carrying amount of an assetinitial recognition of an assetderecognition of a liability
The purpose of the income statement is to show the:Multiple Choicemarket value per share of stock at the date of the statement.change in the fair value of the assets from the prior income statement.revenues collected during the period covered by the statement.net income or net loss for the period covered by the statement.
The income statement showsMultiple Choiceincome only.the net worth of the business.the amount of long-term debt that a company has.the value of the company’s assets.profit or loss over a given period of time.
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