Recognition and Measurement

Recognition and measurement are key concepts in accounting and finance. Recognition refers to the process of formally recording an item in financial statements, such as revenue or expenses, when certain criteria are met. Measurement, on the other hand, involves determining how much that recognized item is worth, often using monetary values. Together, these processes ensure that financial reports accurately reflect a company's economic activities, providing stakeholders with reliable information for decision-making. In essence, recognition tells you what to include, while measurement tells you how to value it.