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.
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.
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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