Question

name the three basic methods of matching.give an example of each.How do they align with the expense recognition criteria outlined in AASB Framework?

Answer 1

Answer:-

The three basic methods of matching are as follows:

1. Immediate Recognition or immediately recognise cost incurred as an expense because no future benefits are expected- For example : Research and development, Advertising

2. Cause and Effect or matching directly a specific form of revenue with the costs incurred in the process of generation of Revenue - For Example : Cost of goods sold, Sales Commission, Salaries and wages

3. Systematic and relocation allocation or matching indirectly costs with the period during which it will provide benefits or even revenue ,Example : Depreciation, Insurance, Depletion, Amortisation

The ASSB framework focuses on the recognition criteria more than on matching. The two criteria for the recognition of expense are stated in the paragraph:

An item that meets or matches the defination of an element should be recognised if:

1. The item has a costs or value that can be measured with reliability and,

2. There is a probability that any future economic benefit in connection with the item will flow to or from the entity