Boreal Bikes describes a pending lawsuit in note 14 but records no liability. Which statement is correct?

Answer

The item is disclosed but not recognised

Options - A. The item is disclosed but not recognised - B. The item is recognised, because it appears in the financial statements - C. The item is recognised at nil - D. The item is neither recognised nor disclosed, since notes are not statements Why - A. Correct — recognition means carrying the item on the face of a statement with a number; a note describes it without recognising it. - B. Appearing in the notes is disclosure. Recognition requires a line on the balance sheet or income statement. - C. A zero carrying amount is not recognition; nothing has been measured or included in the totals. - D. The notes are an integral part of the statements, and describing the item there is exactly what disclosure means.

L1 §2.4.3–2.4.6; LI ch 1