Correction
Derecognition removes all or part of a recognized asset or liability from the statement totals when the applicable requirements call for removal. The underlying contract or business relationship can continue after that accounting step.
Suppose an entity transfers equipment but must repurchase it under specified conditions. Cash receipt and legal title are relevant facts, but neither alone proves full derecognition. The repurchase terms can affect whether the entity has surrendered the rights and obligations required by the applicable guidance.
Even when full removal is appropriate, a retained servicing role, guarantee, or other continuing involvement can require separate recognition or disclosure. Those questions must be tested rather than erased with the old carrying amount.
Check your answer
Identify the recognized unit, the event proposed to remove it, and every right or obligation that continues. Apply the transaction-specific guidance, compute the resulting effects only after that decision, and state any remaining recognition or disclosure work.
When this mistake may appear
- An asset is transferred for cash.
- A recorded balance is removed while a contract continues.
Your work may contain this mistake if:
- Removes an asset from cash receipt or title alone.
- Ignores retained rights, repurchase terms, recourse, or servicing.
- Assumes removal eliminates every related disclosure question.