ACCA Strategic Professional · Strategic Business Reporting (International) · Discussion of issues in financial reporting
Zeta plc is preparing its financial statements and the finance director argues that the Conceptual Framework allows an asset to be recognised whenever it is expected to bring some future benefit. Under the 2018 Conceptual Framework, which statement best describes how an asset is defined?
An asset is a present economic resource controlled by the entity as a result of past events. Control, not legal ownership, matters, and the right need only have the potential to produce economic benefits. The old probability threshold is no longer part of the definition.
- AA present economic resource controlled by the entity as a result of past eventsCorrect
- BA resource owned legally by the entity that is expected to generate cash inflows
- CA probable future economic benefit arising from a past transaction
- DA cost incurred by the entity that has not yet been charged to profit or loss
Explanation
The 2018 Conceptual Framework defines an asset as a present economic resource controlled by the entity as a result of past events. An economic resource is a right with potential to produce economic benefits. Legal ownership is not required, and the 'probable' threshold was removed from the definition, so the other options are wrong.
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