Question

An item should be recognized in the basic financial statements (subject to a cost effectiveness and materiality constraint) when it meets the four criteria: it can be defined, it can be measured, it is ____________________ and it is reliable.

Answer 1

Answer: it is relevant.

Explanation: An item is subject to cost effectiveness and materiality constraint if it can be defined, measured, relevant and reliable. Items reported in financial statements are based on historical costs, replacement cost, net realizable value, market value and present value of cash flow.