What are the two recognition criteria for a capital asset according to IAS 16?

The recognition criteria for a capital asset under IAS 16 state that an asset should be recognized if it meets two specific conditions: the cost can be measured reliably, and it is probable that the future economic benefits associated with the asset will flow to the entity.

The first criterion, that the cost can be measured reliably, ensures that there is a clear, objective basis for reporting the asset on the financial statements. This is crucial because it establishes a foundation for accurate financial reporting and valuation.

The second criterion emphasizes the expectation of future economic benefits. This means that the entity should have reasonable assurance that it will obtain benefits such as cash flows from the asset, which can arise from its use in operations, or from its sale. This focus on benefits is essential as it reflects the fundamental concept of materiality and sustains the relevance of financial information to users.

Options that suggest different criteria, such as intent to sell, asset durability, or revenue generation without the assurance of measurable future economic benefits or reliable cost measurement, do not align with IAS 16's definition and criteria for asset recognition. Hence, the recognized criteria specifically hinge on the reliable measurement of cost and the probable inflow of economic benefits.