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Probability of future economic benefits
Probability of future economic benefits
Probability here means the degree of uncertainty that the future economic benefits associated with an
item will flow to or from the entity. This must be judged on the basis of the characteristics of the entity's
environment and the evidence available when the financial statements are prepared.
Probability here means the degree of uncertainty that the future economic benefits associated with an
item will flow to or from the entity. This must be judged on the basis of the characteristics of the entity's
environment and the evidence available when the financial statements are prepared.
Non-Current Assets
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Non-current assets
If an asset's life extends over more than one accounting period, it earns profits over more than one period.
It is a non-current asset.
Definition
Asset. A resource controlled by an entity as a result of past events and from which future
economic benefits are expected to flow to the entity.
Property, plant and equipment are tangible assets that:
Recognition
It is probable that the future economic benefits will flow to the
entity and the asset has a cost or value that can be measured reliably.
First criterion: future economic benefits
The degree of certainty attached to the flow of future economic benefits must be assessed. This should
be based on the evidence available at the date of initial recognition (usually the date of purchase). The
entity should be assured that it will receive the rewards attached to the asset and it will incur the
associated risks, which will only generally be the case when the rewards and risks have actually passed to
the entity. Until then, the asset should not be recognised.
Second criterion: cost measured reliably
It is generally easy to measure the cost of an asset as the transfer amount on purchase, ie what was paid
for it. Self-constructed assets can also be measured easily by adding together the purchase price of all
the constituent parts (labour, material etc) paid to external parties
Non-current assets
If an asset's life extends over more than one accounting period, it earns profits over more than one period.
It is a non-current asset.
Definition
Asset. A resource controlled by an entity as a result of past events and from which future
economic benefits are expected to flow to the entity.
Property, plant and equipment are tangible assets that:
- Are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes
- Are expected to be used during more than one period
It is probable that the future economic benefits will flow to the
entity and the asset has a cost or value that can be measured reliably.
First criterion: future economic benefits
The degree of certainty attached to the flow of future economic benefits must be assessed. This should
be based on the evidence available at the date of initial recognition (usually the date of purchase). The
entity should be assured that it will receive the rewards attached to the asset and it will incur the
associated risks, which will only generally be the case when the rewards and risks have actually passed to
the entity. Until then, the asset should not be recognised.
Second criterion: cost measured reliably
It is generally easy to measure the cost of an asset as the transfer amount on purchase, ie what was paid
for it. Self-constructed assets can also be measured easily by adding together the purchase price of all
the constituent parts (labour, material etc) paid to external parties
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