Case 2-5 Definition of Assets

Asset- A resource with economic value that a corporation owns or controls with the expectation that it will provide future benefit.

Tentative FASB definition for asset- An asset of an entity is a present economic resource to which the entity has a right or other access that others do not have.

1. Your company is using the building as a plant that is producing automobiles.

a. Per the above definitions this is an asset because the building is fully paid for and therefore the company owns and controls it. It provides future economic benefit as it allows the company to build the cars that they will sell and bring in revenues.

2. Your company is not using the building but plans to sell it. Explain how the building meets the definition of an asset.

a. The building is an asset as the company owns it and controls it. Although it is not being used right now it is a present economic resource and when it is sold it will provide future benefit to the company in the way of revenues from the sale and possible gains if sold above carrying value.

3. Your company is not using the building but plans to remodel it so that it can be used as a plant to produce automobiles.

a. As already stated above since the company owns it and controls it, it qualifies as an asset. As it is expected to be used as the plant where the automobiles will be produced this will allow the company to make their product, sell it and therefore the building will provide future benefit.