Final answer:
Derecognition of an asset or liability is not needed when it is fully depreciated and still in use, or when it is disclosed in notes only. An asset's long life does not automatically lead to derecognition; this occurs when control or obligation ceases, which is typically when an asset or liability is sold or settled.
Step-by-step explanation:
In accounting, derecognition of an asset or liability occurs when that asset or liability is removed from the balance sheet. Derecognition typically takes place when the rights and obligations associated with the asset or liability are no longer present. Exploring the options provided in the question:
- (a) When the asset/liability is fully depreciated - Fully depreciated assets remain on the balance sheet if they are still in use, thus derecognition is not automatic in this case.
- (b) When the asset/liability is sold or settled - This normally requires derecognition as the entity no longer has control over the asset or is no longer obliged for the liability.
- (c) When the asset/liability is recognized in the notes - Disclosure in notes does not eliminate the need for recognition on the balance sheet if the criteria for inclusion are met.
- (d) When the asset/liability has a long life - The length of an asset's life does not determine the need for derecognition, but rather the existence of control over long-term benefits from the asset.
To directly answer the student's question:
Circumstances that do not need derecognition include when an asset/liability is fully depreciated yet still in use (a), and when it is recognized only in the notes (c). An asset/liability's long life (d) also does not necessitate derecognition unless control is lost. However, the sale or settlement of an asset/liability (b) would typically lead to its derecognition.