a. Recognition and de-recognitions

i. Definitions:

• Recognition: Recognition is the process for capturing for inclusion in the statement of financial position or statement of financial performance an item that meets the definition of an element.

• De-recognition: De-recognition is the process of removing an item from financial statements of a reporting entity as an asset, liability or equity when an item no longer meets the criteria for recognition.

ii. Criteria for recognition:

• Only items that meet the definition of an asset, a liability or equity are recognised in the statement of financial position. Only items that meet the definition of income and expenses are recognised in the statement of financial performance.

• An entity recognises an asset or a liability if such recognition provides users of financial statements with relevant information about the asset or liability and about income and expenses or changes in equity.

• The information must provide a faithful representation of the asset or liability, or any income, expense and changes in equity.

• The information must also result in the benefits that exceed the costs of providing the information. There must not be a low probability that an inflow or outflow of economic benefits will result from an asset or a liability.

iii. Process of recognition:

• Recognition involves depicting an item that meets the criteria in words and by a monetary amount and including the amount in the relevant component of financial statements.

• This is done by including the recognised amount in the carrying amount of assets, liabilities, equity, income or expenses.

• The recognised item is included in line items in the statement of financial position or statement of financial performance.

• Disclosure in the notes may also be required to provide useful information about the item recognised.

b. Types of records a company can maintain in a blockchain:

• Financial transactions, including payments, invoices and accounts.

• Legal contracts: storing and verifying contracts securely.

• Digital assets: images, video files, email backups.

• Supply chain management records.

• Audit trails of transactions.

• Ownership records for assets.

Benefits of using blockchain technology:

• Reduces costs, increases traceability and enhances security.

• Encryption of data through blocks enables tracking of transaction time and date.

• Improves audit process efficiency through accurate record-keeping.

• Limits chances of electronic records being altered.

• Allows proof of file integrity through hash comparison.

• Enables smart contracts to automate tasks.

• Revolutionises accounting processes, enabling compliance.

• Reduces manual recording and verification, improving reliability.