General Purpose Financial Reporting

Question 1

Pervasive Expense Recognition Principle

Answer 1

Cause and Effect - Expenses that have a direct link with revenue and provide benefits at specific points in time. E.g. COGS

Question 2

Systematic and Rational Allocation

Answer 2

Expenses that provide benefits over long periods of time. E.g. Depreciation

Question 3

Immediate Recognition

Answer 3

Expenses with no direct link to specific benefits E.g. R&D