Recognition, derecognition and measurement

In this lesson

1. 0:00 Recognition and measurement in financial statements
2. 0:34 Derecognition and faithful representation
3. 1:44 Historical cost measurement basis
4. 2:58 Current value measurement approaches
5. 4:59 Choosing the right measurement base
6. 6:23 Presentation and disclosure principles

About this lesson

This lesson covers the criteria for including transactions in your accounts (relevance and faithful representation), when to remove items, and the measurement bases available to you—from historical cost to current value approaches like fair value and value in use. Understanding these principles is essential for preparing compliant financial statements across ACCA and CIMA qualifications, particularly for papers like Financial Reporting, Strategic Business Reporting and Advanced Financial Reporting. The video walks you through the recognition process: what makes something eligible for inclusion in your financial statements, why some items are disclosed rather than recognised, and how to handle derecognition when you lose control of an asset or settle a liability. You'll explore the two main measurement bases—historical cost (the most common approach) and current value (fair value, value in use, fulfilment value and current cost)—and learn when each is appropriate. The lesson also covers the practical considerations around measurement uncertainty and the importance of consistency when selecting measurement bases for related items. Finally, you'll discover how to present and disclose information effectively so your financial statements remain understandable and comparable. The focus is on entity-specific disclosures based on principles rather than rigid rules, aggregating information sensibly, and grouping similar items together. These concepts form the foundation of sound financial reporting and will strengthen your ability to prepare statements that meet regulatory standards and user expectations.

Duration: 8m