What happens to an identifiable asset that meets the separability criterion?

An identifiable asset that meets the separability criterion must be separately recognized. This is fundamental to financial reporting and valuation because such assets can be distinguished from goodwill and other intangible assets. The separability criterion indicates that an asset can be separated or divided from the entity and sold, transferred, licensed, rented, or exchanged, either individually or as part of a group of assets.

Recognizing identifiable assets separately is crucial for accurate financial statements, as it provides stakeholders with a clearer picture of the company's resources. This approach aligns with accounting principles that promote transparency and accuracy in reflecting the true value of a business's assets. By separately recognizing these assets, accountants ensure that the financial statements appropriately reflect the organization’s health and potential future cash flows.