ASSETS IN ACCOUNTING: REALITY LOST

While the contemporary view of assets in accounting is of ‘future economic benefits’, the appropriateness of this definition for financial reporting purposes continues to be questioned. Samuelson [1996, p. 156] argued that assets should be defined as ‘property rights’ while Schuetze [1993, p. 69] proposed that assets should be defined simply as cash, claims to cash and items that could be sold separately for cash. These notions are not new. Up until the latter part of the 19th century the emphasis in the accounting literature was on the recording of ‘property’ or ‘effects’, commonly understood to be things or rights which were exchangeable for cash. The aim of this paper is to trace changes in the definitional concept of assets in an attempt to discover why professional accounting bodies in the major English speaking countries have adopted the problematic abstract ‘future benefit’ notion, which is so far removed from the simple concept of assets as exchangeable things or rights. It is suggested that in the future financial reporting requirements for business entities include a statement of ‘separably exchangeable property’ and legal obligations at the reporting date.