International financial reporting standard (IFRS) through the International Accounting Standard Board (IASB) sets out the definition and essential characteristics of assets and liabilities in the presentation of financial statements which users of the statements are likely to rely on when making major economic decision
The following are essential characteristics of assets and liabilities in accordance with provisions of IAS 1 presentation of financial statements.
Essential characteristics of assets.
IASB defines asset as a resource controlled by an entity as the results of past events and from which future economic benefits are expected to flow to the entity
The characteristics of the definition are as follows
Emphasis on control rather than ownership of asset. It means the ability to restrict other entity from using the asset
Also, it places emphasis on substance of the transaction rather than their legal form
When there is control of an asset, it is recognized in the statement of financial position e.g finance lease, contractual rights
The definition makes reference to the past events, thereby excluding assets that may occur in the future
Essential characteristics of liabilities:
IASB defines liability as the present obligation of the entity arising from the past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
from this definition the characteristics of the a liability are as follows
it is opposite or mirror of assets
it is present obligation
the obligation are legally enforceable
such obligations may arise on provisions, contingent liabilities .eg replacing faulty assets, warranty etc