What is an Asset Really? Surprise!

Even if you have given any real thought to what an asset is, most of us untrained in the accounting arts think of an asset as something of value.  While this isn’t untrue, it’s only part of the story.  Let’s look at a few definitions:

  • Webster Dictionary: A single item of ownership having exchange value or convertible into cash.
  • American Institute of CPAs (AICPA): Any economic resources (tangible/intangible) that can be owned or produce positive economic value.
  • Financial Accounting Standards Board (FASB): A probable future economic benefit obtained or controlled by a particular entity as a result of past transactions or events.
  • International Accounting Standards Board: A resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise.

You may notice some interesting nuances of what really comprise an asset.

First is the notion that an asset must be owned. OK, this is somewhat obvious, but it explains why a company’s so called “human assets” (employees) are not found on the balance sheet. There’s this little matter of the Emancipation Proclamation.  In most civilized countries at least, people cannot be owned. In the US we are at-will employees (whether we feel like it or not some days!).  Even though many companies manage their workforce with the same discipline as a true asset, it’s more accurate and appropriate to refer to employees as resources, not assets.

The second key characteristic to note is that assets don’t actually have value per-se, it’s more that they have a probability of generating positive future economic value. This means that even the most dormant asset sitting on a shelf somewhere has the potential to contribute toward generating revenue. So arguments about unused assets being valueless are just plain flawed.

So what about information?  Information is owned and controlled by a business. Information has exchange value. Information can be used to generate future economic

Should enterprises, even accountants, consider information as an asset?

We look forward to your ideas and comments. 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: