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FASB proposes a framework for recognition and derecognition

On November 22, the FASB issued an exposure draft of a proposed new chapter in its Conceptual Framework that would set forth recognition and derecognition criteria and guidance on when an item should be incorporated into and removed from financial statements. The new chapter would be consistent with the rest of the framework in that it establishes concepts that the Board would use in developing standards that meet the objective of financial accounting and reporting and enhance the understandability of financial information. Under the proposed framework, financial statement items would be recognized if they meet three criteria: (i) the item meets the definition of a financial statement element; (ii) the item is measurable; and (iii) the item can be depicted and measured with faithful representation. Derecognition would occur if any one of the recognition criteria is no longer met. Comments on the proposal are due by February 21, 2023.

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