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
Question
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
Solution
The recognition of income does not occur at the same time as the issue of shares. Here's why:
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Issue of Shares: This is a financing activity, not an operating activity. When a company issues shares, it is raising capital, which is recorded as equity, not income. The company receives cash (or other assets) in exchange for the shares, but this is not considered income. It's a change in the structure of the company's equity and liabilities, not a result of its operations.
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An Increase in the Carrying Amount of an Asset: This could potentially lead to recognition of income, but not necessarily at the same time. For example, if the value of an asset increases, this could lead to a gain if the asset is sold. However, the increase in value itself is not recognized as income until the asset is actually sold.
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Initial Recognition of an Asset: When an asset is initially recognized, it is recorded at its cost. This is not income, but rather a use of funds. The cost of the asset will be expensed over time through depreciation, which will reduce income.
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Derecognition of a Liability: When a liability is derecognized, it means that the company no longer has an obligation to pay. This could occur because the liability has been paid off, or because the company has been legally released from the obligation. This could potentially lead to recognition of income, but not necessarily at the same time. For example, if a liability is settled for less than its carrying amount, the difference could be recognized as income. However, the derecognition of the liability itself is not income.
Similar Questions
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.
Liabilities which do not meet the recognition criteria and where the possibility of an outflow of economic resources is remote should: Reading required Learning objective 9.4 on page 256. Group of answer choices not be recognised/disclosed in the financial statement at all. be recognised as an accrual. be recognised as a provision. be disclosed as a contingent liability.
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.
The following statement is true for financial assets measured at fair value through other comprehensive incomeAnswer :Fair value is recognised at the year end Fair value changes are reflected in other comprehensive income Transaction cost is included as part of initial measurment All of the above
The two categories of income, as specified in the Conceptual Framework, are: Reading required: Learning objective 16.2 on pages 518-519Group of answer choicesincome and gains.revenue and gains.revenue and profits.income and revenue.
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