The International Financial Reporting Standards

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The International Financial Reporting Standards (IFRS) identified the five ele-ments of financial statements as the following: (1) assets, (2) liabilities, (3) capi-tal, (4) income, and (5) expenses.
The first element, assets, are “resources controlled by the enterprise as a result of past events, and from which future economic benefits are expected to flow to the enterprise” (IFRS, 2010, pg.17). These future economic benefits may directly or indirectly flow into the company cash assets or cash asset equivalents. Since assets are basically measurable resources that have value to an organization (in dollar basis or not), they may be in a form of cash, land, inventory, property, equipment, patents, prepaid insurances, etc. They may also be
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Tangible assets are basically those that fall under the Property-Plant-Equipment (PPE) category. These include land, buildings, equipment, natural resources, etc. While all other fixed assets are subject to depreciation, only land is not, as this is something considered a natural bounty from Allah Ta’ala. It does not reduce in quantity and nor does it lose its value over time.
Intangible assets are those that lack physical substance, such as copyrights, pa-tents, licenses, and trademarks that can either be purchased or created internal-ly. These assets are also depreciated over their useful lives.
“Resources, which are not capable of providing a certain future economic bene-fit, are either a potential loss or current operating expenses and may not be clas-sified as assets. The physical form is not required for the existence of an asset (assets, for example, include patents and copyright (assets, for example, include patents and copyright, if a company acquires them for cash and expects an in-flow of future economic benefits from their use)” (IFRS, 2010, pg. 17).
According to the IFRS (2010, pg. 18), “assets are recorded only after past trans-actions; the intention to purchase some assets may not be considered as a suf-ficient basis for recording of assets.” And “In order for an asset to be represented in the balance sheet, it should have a cost or its value should be reliable”.
An increase in any asset account in the balance sheet is recorded as a
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