Fasb 6 Essay

1096 WordsSep 30, 20145 Pages
* Asset has 3 essential characteristics: (a) it embodies probable future benefit that involves a capacity, singly or in combination with other assets, to contribute directly or indirectly to future net cash inflows (b) a particular entity can obtain the benefit and control others’ access to it (c) the transaction or other event giving rise to the entity’s right to or control of the benefit has already occurred. * Liability has 3 essential characteristics: (a) it embodies present duty or responsibility to one or more other entities that entails settlement by probable future transfer or use of assets at a specified or determinable date, on occurrence of a specified event, or on demand (b) the duty or responsibility obligates a particular entity, leaving it little or no discretion to avoid the future sacrifice (c) the transaction or other event obligating the entity has already happened. * All practical financial accounting and reporting models have limitations. The preceding paragraphs describe one limit that may affect various models – how recognition or measurement considerations stemming from uncertainty may result in not recognizing as asses or liabilities some items that qualify as such under the definitions or may result in postponing recognition of some assets or liabilities until their existence becomes more probable or their measures become more reliable. * Accrual accounting attempts to recognize non-cash events and circumstances as they occur and involves not only accruals but also deferrals, including allocations and amortizations. Accrual is concerned with expected future cash receipts and payments: it is the accounting process of recognizing assets or liabilities and the related liabilities, assets, revenues, expenses, gains, or losses for amounts expected to be received or paid, usually in cash, in the future. Deferral is concerned with past

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