Winston, a young accountant has determined that the definition of an asset as been satisfied for an item.He states that the item can now be recognised in the financial statements of the relevant entity.Winston's statement is:
A)Incorrect, because the recognition criteria also have to be satisfied
B)Incorrect, because control over the future benefits of the asset has to be determined beyond reasonable doubt first
C)Correct, because once the definition is satisfied the legal enforceability of the asset is satisfied an this automatically satisfies the recognition criteria
D)Correct, because once the definition is satisfied the legal enforceability and tangibility of the asset are established, which automatically satisfies the recognition criteria

Question

Quizplus · Accepted Answer

Winston's statement is incorrect because satisfying the definition of an asset does not automatically lead to recognition in the financial statements. The recognition criteria, which include the probability of future economic benefits flowing to or from the entity and the measurement reliability of the asset, must also be satisfied.

Winston, a Young Accountant Has Determined That the Definition of an Asset