03-12-2007, 08:06 PM
Dear,
Nice question.
Para 49 of Framework of IFRSs defines an asset as
"An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity"
Para 89 of Framework lays down criteria for recognition of an asset
"An asset is recognised in the balance sheet when it is probable that the future eceonomic benefits will flow to the entity and the asset has a cost or value that can be measured reliably"
Similar criteria could be found in para 7 of IAS 16 and para 21, 22, 24 and 57 of IAS 38 for recognizing property, plant and equipment and Intangible assets respectively. (the assets other than the financial assets).
Electronic data room is prepared at the time of privatizations for the due dliligence of so many investors. Entities may also do this to transfer the huge data easily or to store such data in the long-run or to keep back up as a disaster recovery plan.
We can see that the staionery used for recording various transactions and other data maintained on papers is never recognised as an asset while such stationery has a cost. Why we dont do this?
Because of economic justification. No future economic benefits could be caused by such papers (on their own) for the entity. What is the economic benefit?
Para 53 of Framework of IFRSs describes it as a potential to cause inflow of cash or cash equivalents to the entity. IT may also be a potential to reduce cash outflows from the entity.
We have never capitalized the salaries of the accounting staff who keep the records on manual papers or in systems that could be generated on papers. Because, its economic justfication is of an expense as far as future economic benefits are concerned.
In my view the data stored on CDs, Cartridges and tapes (on its own) cannot contribute any economic benefits to the entity. Therefore, its cost or whatever ancillary cost like labor or overheads in recording such data cannnot be recognized as an asset. These costs have to be recorded as an expense.
Hope the clarification will serve your purpose.
Best regards,
Kamran.
Nice question.
Para 49 of Framework of IFRSs defines an asset as
"An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity"
Para 89 of Framework lays down criteria for recognition of an asset
"An asset is recognised in the balance sheet when it is probable that the future eceonomic benefits will flow to the entity and the asset has a cost or value that can be measured reliably"
Similar criteria could be found in para 7 of IAS 16 and para 21, 22, 24 and 57 of IAS 38 for recognizing property, plant and equipment and Intangible assets respectively. (the assets other than the financial assets).
Electronic data room is prepared at the time of privatizations for the due dliligence of so many investors. Entities may also do this to transfer the huge data easily or to store such data in the long-run or to keep back up as a disaster recovery plan.
We can see that the staionery used for recording various transactions and other data maintained on papers is never recognised as an asset while such stationery has a cost. Why we dont do this?
Because of economic justification. No future economic benefits could be caused by such papers (on their own) for the entity. What is the economic benefit?
Para 53 of Framework of IFRSs describes it as a potential to cause inflow of cash or cash equivalents to the entity. IT may also be a potential to reduce cash outflows from the entity.
We have never capitalized the salaries of the accounting staff who keep the records on manual papers or in systems that could be generated on papers. Because, its economic justfication is of an expense as far as future economic benefits are concerned.
In my view the data stored on CDs, Cartridges and tapes (on its own) cannot contribute any economic benefits to the entity. Therefore, its cost or whatever ancillary cost like labor or overheads in recording such data cannnot be recognized as an asset. These costs have to be recorded as an expense.
Hope the clarification will serve your purpose.
Best regards,
Kamran.
