Professional Documents
Culture Documents
Asset : a present economic resource controlled by the entity as a result of past events
- Economic resource: a RIGHT that has the potential TO PRODUCE ECONOMIC BENEFITS
*Economic assets’ only requirement is its economic resources be controlled. Thus, it can’t be owned by
the entity yet still be considered as an economic asset. As long as an entity has control over it, even
though it’s not fully 100% control, it is still and will be considered as an asset.
RIGHT: rights that have the potential to produce economic benefits take many forms
FORMS OF RIGHT
Example of rights: right to use a physical object or a right to benefit from the residual value of a leased
object
Paragraph 4.8 : An entity’s right TO OBTAIN THE ECONOMIC BENEFITS produced by such goods
or services “exists momentarily until the entity consumes the goods or services”
Paragraph 4.9: NOT ALL of an entity’s rights are assets of that entity
* There are instances that assets are held for control but not owned.
Paragraph 4.10: An entity CANNOT HAVE A RIGHT TO OBTAIN ECONOMIC BENEFITS from itself.
- Example: Reacquisition of trade securities / debt securities since when we reacquire this, there is a
decrease to assets
Paragraph 4.11 : In principle, EACH OF AN ENTITY’S RIGHTS is a “separate asset”. However FOR
ACCOUNTING PURPOSES, “related rights” are often treated as a single unit of account that is a
single asset.
Paragraph 4.12 : In many cases, the set of RIGHTS arising from LEGAL OWNERSHIP of a physical
object is accounted for as a SINGLE ASSET. Conceptually, the ECONOMIC RESOURCES is the “set
of rights”, not the physical object.
Paragraph 4.13: In some cases, “it is uncertain whether a right exists”. Until that existence
uncertainty is resolved – for ex. by “court ruling” – it is uncertain whether the entity has a right
and, consequently, whether an asset exists.
- No right = No existence of asset. Thus, it must be resolved and confirmed that there is right. If
confirmed, HAVING RIGHTS = HAVING LEGAL EXISTENCE OF ASSETS