Give an Example of an Asset That Is Not Recorded on a Balance Sheet, and Critically Evaluate Why It Is Not, Before Developing an Argument for the Inclusion of the Asset.

1217 Words Dec 16th, 2011 5 Pages
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Give an example of an asset that is not recorded on a balance sheet, and critically evaluate why it is not, before developing an argument for the inclusion of the asset.

Whether or not certain assets and liabilities should be placed on a balance sheet is a much talked about subject. The accounting equation, Assets – Liabilities = Ownership Interest, represents the balance sheet; which is produced each year in a Public Limited Company’s financial statement; which can be viewed by the public. I will use this essay to discuss why the asset of a ‘home-grown’ football player, a player who signs as a trainee with a professional club under the age of 16, is not included in the balance sheet of the company.
According to
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So to comply with this, the employee would obviously need to exist and the goods and services they produce would need to be shown. In this case the player exists and the service he provides can be shown on a football pitch, for example. The other recognition test is ‘the new asset or the addition to the existing asset can be measured at a monetary amount with sufficient reliability’ (ASB, 1999). This is where the home-grown player isn’t recognised due to the inability to reliably measure him in a monetary way.
It is very difficult to determine how a monetary amount can be produced to represent the performance of an employee in any one industry; let alone create a way of calculating it to cover all bases, which the accounting industry no doubt have tried. Different companies want different skills and attributes from their employees; so a way of calculating a value is tremendously difficult. Therefore, the footballer cannot be measured reliably (monetarily) and so cannot be put on a balance sheet.
However, this would mean that a player such as David Beckham; who ‘signed as a trainee in 1991’ (University of Leeds, 2002) at Manchester United Football Club would not be present on the balance sheet, and would not be seen as an asset. He was developed by the football club to produce such a service, therefore he is ‘an

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