SFAC No. 6, paragraph 25: “Assets are probable future economic benefits obtained or controlled by a...

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SFAC No. 6, paragraph 25: “Assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.”  	IASB The Conceptual Framework for Financial Reporting, Chapter 4, paragraph 4.4(a): “An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.” 	The Boards’ working definition as of October 2008 from the Joint Project on Conceptual Framework, Phase B – Elements and Recognition: “An asset of an entity is a present economic resource to which the entity has a right or other access that others do not have.”  Required   	Read each definition and compare and contrast the FASB and IASB versions and then compare to the Boards’ definition. 	What is the best definition and why? 	Review the following items and evaluate if they should be recorded as an asset under the Boards’ definition defined above. Focus on “… present economic resource” and “… right or other access” in your analysis. Complete the table provided. 
	
Document Preview: Conceptual frameworkQuestion 1BackgroundFollowing is the definition of an asset from three sources:SFAC No. 6, paragraph 25: “Assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.”IASB The Conceptual Framework for Financial Reporting, Chapter 4, paragraph 4.4(a): “An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.”The Boards’ working definition as of October 2008 from the Joint Project on Conceptual Framework, Phase B – Elements and Recognition: “An asset of an entity is a present economic resource to which the entity has a right or other access that others do not have.”RequiredRead each definition and compare and contrast the FASB and IASB versions and then compare to the Boards’ definition.What is the best definition and why?Review the following items and evaluate if they should be recorded as an asset under the Boards’ definition defined above. Focus on “… present economic resource” and “… right or other access” in your analysis.  Complete the table provided.Item“… present economic resource”(Y/N)“… right or other access”(Y/N)Asset(Y/N)CashAccounts receivableUncollectible accounts receivableRaw materials for inventoryAccounts receivable arising from future salesProven oil reservesGoodwillCreated with an evaluation copy of Aspose.Words. To discover the full versions of our APIs please visit: https://products.aspose.com/words/PAGE  Created with an evaluation copy of Aspose.Words. To discover the full versions of our APIs please visit: https://products.aspose.com/words/[Type here]Created with an evaluation copy of Aspose.Words. To discover the full versions of our APIs please visit: https://products.aspose.com/words/[Type here][Type here]Question 2BackgroundFollowing is the definition of a liability from three...

Robert · Accepted Answer

Asset and Liabilities 
Asset as per IASB 
An asset is a resource controlled by entity as a result of past events and from which future 
economic benefits are expected to flow to the entity. (Framework, paragraph 49) 
Asset as per FASB 
Assets are probable future economic benefits obtained or controlled by a particular entity as a 
result of past transactions or events. (CON 6, paragraph 25) 
Analysis of definitions given by IASB and FASB 
Both the definitions talk about future economic benefits which are to be received by entity as a 
result of past events and these assets are controlled by entity. Under IASB it is mentioned that 
“future economic benefits” and under FASB it is mentioned that “probable future economic 
benefits”.  
Both of these definitions are criticized because of following reasons: 
1. These definition have been misinterpreted by users because of the terms expected (IASB) 
and probable (FASB) to imply that there must be strong possibility of future inflow of 
economic benefits for the definitions to meet. This does not take into consider asset items 
with lower possibility of future economic benefits.  
2. The definitions give too much importance on identification of future inflow of economic 
benefits, in spite of concentrating on item that is currently present, an economic resource.  
3. The word “control” mentioned in above definitions was misinterpreted in the same sense 
as used for consolidation accounting purpose. The intention of control was whether entity 
is having some rights or privileged access to economic resource. 
4. The past events or transactions that give rise to asset are irrelevant, instead it should be 
enquired whether entity is the owner of asset on balance sheet date.  
Asset as per Board 
Asset is a present economic resource to which the entity has a right or other access that others do 
not have.

SFAC No. 6, paragraph 25: “Assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.” IASB The Conceptual Framework for...

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