What is the new definition of an asset under the revised conceptual framework?
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The IASB’s Conceptual framework was first published in 1999, partly revised in 2010 and now issued in full in March 2018, based on popular demand. Yeah, I wasn’t wrong to have said “by popular demands”, stakeholders within the financial reporting space agitated for a complete financial reporting framework to guide preparation and presentation of financial reports. Again, the IASB deemed it fit to make clarity in some parts of the previous versions and make updates to some parts. Show What has changed is what comes in to your mind, right? Please relax and enjoy this piece. Before delving into the major highlights of the conceptual framework, permit me to remind you of what The Conceptual framework is. Do you know that accounting standards are not issued in a vacuum? Imagine, we do not have framework that guides issuance of accounting standards, perhaps we would recognize the food we eat as an income, or capitalize advertisement expenses. On a lighter note, I know a blessed country where snake purportedly swallowed N36million, so, now reminisce on what this gigantic nation would do should they be allowed to issue accounting standards without recourse to the framework (I foresee recognition of such an enigmatic creature as an asset.) The conceptual framework is not itself an accounting standard and where its postulations conflict with that of accounting standards, the position of the standard hold sway. It is however, a foundation upon which new standards are built and existing ones are evaluated. Meaning the IASB does not belittle the framework at all, where it wishes to issue a new standard or critic existing ones, it checks what the conceptual framework posits. Just as it is so logical you build a good notion or impression in the mind of a “babe” if you wish you to ask her out for a relationship. It is to solidify your stance, project you well, make you understand the babe and at the end you lose the “Mr or Uncle” in your name, then straight to the altar- don’t pay me for this, LOL! So, what are the key highlights and update? ü New definition of element of financial statement ü Recognition criteria for assets and liabilities ü Factors to be considered when selecting a measurement basis ü Discussion around Presentation and Disclosure ü Guidance on Derecognition of assets and Liabilities. ü Insight into Stewardship, Prudence, Management uncertainty, Substance overform. ü Chapter 3 – The reporting entity. How the Conceptual Framework 2018’s revision stands; · Chapter 1- The Objective of Purpose Financial reporting · Chapter 2- Qualitative characteristics of useful financial information · Chapter 3- The reporting entity · Chapter 4- The elements of financial statement · Chapter 5- Recognition and De-recognition · Chapter 6- Measurement · Chapter 7- Presentation and Disclosure Shall we discuss the elements of financial statements? Pls follow through! Anyway, the figures on the financial statement you see are made up of some line items, these line items are the elements of financial statement. They include Asset, Liabilities, income and expenses. The definition of these elements have now been revised and would be discussed in subsequent heading; Asset The previous version of the conceptual framework defines asset as resource controlled by an entity as a result of past event from which future economic benefits are expected to flow to the entity. One begins to wonder what update could be made to this definition. You should decide the worthwhileness of the update after this piece. The revised conceptual framework defines an asset as economic resource controlled by an entity as a result of past events. The IASB believes economic resource in this definition implies right that has potential to produce economic benefits. Meaning, asset recognition is no longer about probability that those benefits flow to the entity and that the economic resource now included in the definition implies right to benefits from the use of the asset. The past events part of the definition implies that assets must have arisen from event that has happened which could be cash payment for the acquisition of the asset, could be deferred payment in the form of lease, could also be exchange arrangement. Whichever ways, events must have taken place to have an asset. A very agile intention to purchase an asset does not create an asset in anyway. Another important take away is the issue of control. The resource in question must be controlled by the entity to qualify as asset. I love to define control as one’s ability to determine the use of another resource (often put it as “my ability to say stand up, and you stand, sit down and then you sit”). As usual, I wouldn’t want to bore you with long stories, I will be back with an in-depth look into other key highlights of the revised framework in my subsequent publication. What is an asset according to the revised Conceptual Framework?Asset. 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. [
What is the new definition of asset?Understanding Assets
An asset represents an economic resource owned or controlled by, for example, a company. An economic resource is something that may be scarce and has the ability to produce economic benefit by generating cash inflows or decreasing cash outflows.
What is the new Conceptual Framework?The new Conceptual Framework explains how to decide when assets and liabilities should be measured using historical cost and when they should be measured at current value. It states that those decisions should be based on which measure would provide useful information to investors.
What is the new Conceptual Framework for financial reporting?The new Conceptual Framework applies to 'reporting entities', which paragraph 3.10 describes as effectively being all entities that are required, or choose, to prepare financial statements. A reporting entity is an entity that is required, or chooses, to prepare financial statements.
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