Obtain the annual report of a listed company. From the balance sheet list the items shown as assets and liabilities. (This will require you to look in detail at the notes to the accounts using the references on the face of the balance sheet.) Share out the list of assets and liabilities so that each person has four or five assets and four or five liability items.

1. Separately, using the definitions and recognition criteria, prepare a short statement explaining why each item on your list passes the tests of definition and recognition. State the evidence you would expect to see, as auditor, to confirm the expected future inflow of economic benefit from any asset and the expected future outflow of benefit from any liability.

2. Present your explanations to the group and together prepare a list of assets and a separate list of liabilities in order of the uncertainty which attaches to the expected future benefit.

3. Read the ‘contingent liability’ note, if there is one, to find examples of liabilities which have not been recognized but have been disclosed. Why will you not find a ‘contingent asset’ note?