To be recognized in the financial statements, an item must meet the definition of an element and be
A)measurable, understandable, and relevant
B)reliable, measurable, and realized
C)realized, relevant, and reliable
D)relevant, measurable, and reliable

Question

Quizplus · Accepted Answer

According to the Conceptual Framework for Financial Reporting, to be recognized in the financial statements, an item must meet the definition of an element (such as an asset, liability, equity, income or expense) and have three fundamental characteristics: relevance (meaningful and useful to decision makers), faithful representation (a faithful depiction of the economic phenomena it purports to represent), and be measurable (able to be quantified in monetary terms with sufficient reliability). Therefore, the best choice is D since it includes all three required characteristics.

To Be Recognized in the Financial Statements, an Item Must