Krupetskiy_Research3

Krupetskiy_Research3 - Tanya Krupetskiy Professor Turner...

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Tanya Krupetskiy Professor Turner ACC – 211 Week 4 Research Assignment 3 (a) The three essential characteristics of assets. As defined in the FASB Statements of Financial Accounting Concept #6, “assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events” (FASB Concept Statement #6, 25). An asset has three essential characteristics: 1) it embodies a probable future benefit that involves a capacity, singly or in combination with other assets, to contribute directly or indirectly to future net cash inflows, 2) a particular entity can obtain the benefit and control others’ access to it, and 3) the transaction or other event giving rise to the entity’s right to or control of the benefit has already occurred (FASB Concept Statement #6, 26). The following features are not characteristics of assets: assets may be acquired at a cost and they may be tangible, exchangeable, or legally enforceable (26). Under their definition assets are also commonly referred to as economic resources that are “useful for carrying out economic activities, such as consumption, production, and exchange” (27). Whether in a business entity or a not-for- profit organization, all assets have one characteristic in common – “service potential” or “future economic benefit” (28). Among the most important assets is money. Money’s purchasing power is “the basis of its value and future economic benefits” (29). Other assets, other than money, also produce economic benefits because they can be exchanged for cash or other goods and services (30). On the other hand, services provided by other entities can only
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be assets momentarily. However, “their use may create or add value to other assets of the
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Krupetskiy_Research3 - Tanya Krupetskiy Professor Turner...

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