Walter Schuetze, The Chief Accountant

Walter P. Schuetze, the Chief Accountant to SEC and the Chief Accountant of the SEC’s Division of Enforcement, published an article entitled “What are assets and liabilities? Where is true north? (Accounting that my sister would understand) in 2001. Mr. Schuetze addresses what are assets and liabilities? He asserts that “the FASB’s definition of an asset is so complex, so abstract, so open-ended, so all-inclusive and so vague that we cannot use it to solve problems” (p. 12). In my opinion, that statement is somewhat unprecise because of three reasons following.
Schuetze states that “Assets are cash, contractual claims to cash, and things that the business owns and that can be sold for cash” (p. 5). For example, the author mentions that his sister paid about $100,000 in excess of the fair value to buy out her competitor who agreed not to compete against his sister’s business for five years. His sister frustrate that the cost of purchased goodwill should not be reported as assets. According to asset’s definition, however, “assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events”. Indeed, goodwill cannot directly cause future cash flows but it does play an …show more content…
Nevertheless, in my opinion, that standpoint should not be applied for every situation. Let take an example of advertising cost, under Statement of Position 93-7, a company should capitalize and amortize direct response advertising if “(a) its primary purpose is to elicit sales to customers who could be shown to have responded specifically to the advertising and (b) that results in probable future economic benefits” (p.2). The advertising activity leads to probable future revenues that exceed future costs incurred, what should that future value be quantified if it is not considered as an