Not everything in accounting can be treated as assets. Recognition of liabilities, expenses and revenues are having specific recognition criteria. Assets are also having distinct characteristics.
The following are the essential characteristics of an asset as per Conceptual Framework:
- resource must contain future economic benefits
- control or requiring a capacity to benefit from the asset in the pursuit of the entity’s objectives and an ability to deny or regulate the access of others to those benefits.
- past event which giving rise to the entity’s control over future economic benefits
Non- essential characteristics of an asset :
- purchased at a cost
With the proposed definition of an asset, namely “An asset of an entity is a present economic resource to which through an enforceable right or other means the entity has access or can limit the access of others” there will be less focus on future economic benefits and more on present resource; and less on control, with more on the existence of enforceable rights to limit access of others.