Control of an economic resource

Control of an economic resource – This is all about: A present economic resource controlled by the entity as a result of past events.

Two very simple examples to start with:

Pat Co has purchased a patent for $20,000. The patent gives the company sole use of a particular manufacturing process which will save $3,000 a year for the next five years.

This is an asset, albeit an intangible one. There is a past event, control and future economic benefit (through cost savings).

Baldwin Co (the company) paid Don Brennan $10,000 to set up a car repair shop, on condition that priority treatment is given to cars from the company’s fleet.

This cannot be classified as an asset. Baldwin Co

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Financial reporting models

Financial reporting models – This is a note on the innovative history of Philips’ financial reporting, see the ‘Introduction to a history of innovation in financial reporting‘.

Financial reporting modelsLiterature suggests that voluntary disclosure of financial reporting is associated with participatory, democratic ownership structures. Conversely, secretive attitudes are fostered by the centralization of equity ownership around dominating interest groups and by institutionalized systems of collective bargaining.

Over the years the purpose of annual reports changed by its changing group of users. Three ownership models that explain the purpose of annual reports are firstly described. After that the agency theory (see below) and creative accounting by CEO succession (follow link) are worked out as explaining tools.

(1) Proprietary model and (2)

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Stewardship and agency theory

Stewardship and agency theory – This part is a more detailed explanation of the revised Conceptual Framework for Financial Reporting 2018 (Conceptual Framework) issued by the International Accounting Standards Board (IASB) regarding Control as part of chapter 4 – The Elements of Financial Statements, section 4.25 on one party (a principal) engaging another party (an agent) to act on behalf of, and for the benefit of, the principal.

The view of ‘stewardship’ given in the current Conceptual Framework mentions that management are accountable to the entity’s capital providers for the custody and safekeeping of the entity’s economic resources and for their efficient and profitable use, including protecting them from unfavorable economic effects such as inflation and technological changes. Management … Read more