Recognition Of The Elements Of The Financial Statements

Recognition Of The Elements Of The Financial Statements

accounting-services-in-vietnam239. The financial statements must recognize the elements on the financial status and business situation of enterprises; such elements must be recognized item by item. Each item shall be recognized in the financial statements if satisfying concurrently the following two criteria:

a/ Being certain to gain or reduce future economic benefits;

b/ Such item has some value which can be determined in a reliable manner.

Recognition of assets

40. Assets will be recognized in the balance sheets when enterprises are certain to gain future economic benefits therefrom and the value of such assets are determined in a reliable way.

41. Assets will not be recognized in the balance sheets when costs incurred are not certain to yield future economic benefits for enterprises and these costs will be recognized in the reports on business results as soon as they arise.

Recognition of liabilities

42. Liabilities will be recognized in the balance sheets when there are adequate conditions to ascertain that enterprises will have to spend a cash amount on the current obligations they have to pay for, and such liabilities must be determined in a reliable way.

Recognition of revenues and other incomes

accounting-services-in-vietnam143. Revenues and other incomes will be recognized in the reports on business results when they gain future economic benefits related to the increase in assets or decrease in liabilities, and such increased value must be determined in a reliable way.

Recognition of costs

44. Production, business and other costs will be recognized in the reports on business results when these costs reduce future economic benefits related to the decrease in assets or increase in liabilities, and these costs must be determined in a reliable way.

45. Costs recognized in the reports on business results must comply with the principle of matching between revenues and cost.

46. When economic benefits expected to be obtained over many accounting periods are related to revenues and other incomes which are determined indirectly, the related costs will be recognized in the reports on business results on the basis of systematic or proportional amortization.

47. A cost will be immediately recognized in the reports on business results in the period if it fails to bring about economic benefits in subsequent periods.