FASB Releases New Chapter of Conceptual Framework

The FASB has released a new chapter, “Recognition and Derecognition” (Chapter 5), of its Conceptual Framework for Financial Reporting. Among other things, the new chapter indicates that an item must meet three criteria before an entity can recognize the item in its financial statements. Specifically, the item must:

1. Meet “the definition of an element of financial statements.”
2. Be measurable and have “a relevant measurement attribute.”
3. Be able to be “depicted and measured with faithful representation.”

In addition, the new chapter “sets forth the concept that derecognition — the process of removing an item from financial statements of a reporting entity as an asset, liability, or equity — should occur when an item no longer meets any one of the recognition criteria.”

For more information, see the press release on the FASB’s Web site.