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Wiley GAAP 2008 by Colorado Steven M. Bragg Englewood, Ralph Nach American Express Tax and Business Inc., Barry J. Epstein

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Definitions of Terms

AssetsProbable future economic benefits obtained or controlled by a particular enterprise as a result of past transactions or events (CON 6).The following three characteristics must be present for an item to qualify as an asset: The asset must provide probable future economic benefit that enables it to provide future net cash inflows. The enterprise must be able to receive the benefit and restrict others' access to it. The event that provides the enterprise with the right to receive the benefit has occurred. All three characteristics must be present for an item to meet the definition of an asset. Assets have other characteristics, but those characteristics are not essential to the definition. For example, most assets are exchangeable, legally enforceable, or tangible. But an item can still be an asset even if it cannot be exchanged, provided that the enterprise that owns it can use it in a manner that generates future cash flows or other benefits. Similarly, rights to an item need not be legally enforceable if the rights can be enforced in other ways, such as by using social or moral persuasion. Finally, assets need not be tangible. Securities, patents, and similar ownership rights are assets despite the fact that they cannot be touched or seen.The characteristic possessed by all assets is service potential (also called future economic benefit); the ability to directly or indirectly provide services or benefits to the owner of the asset, usually in the form ...

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