Today I bought a shoe rack. I needed a shoe rack because I normally keep my shoes under my bed, and dust and other crap was starting to accumulate. It got to the point that whenever I put on a shoe, I'd have to shake the dust out, despite it only being put under my bed like two or three days earlier. So in my opinion, I thought it will prove to be a rather valuable asset.
But then breeds an interesting (somewhat) question. Having done (and done badly on) an accounting test last Friday night, I'm in an analytical kind of mood. I don't believe in letting this sleeping dog lie, smug and satisfied, having maimed me and half of the other people doing the “Issues in Financial Reporting” course.
Question: Can I classify my shoe rack as an asset?
To define an asset, the item in question must pertain 3 distinct properties as characterised by Australian Accounting Standards.
1) The item must be within the control of the party
2) The fair value of the item must be able to be reliably measured
3) The item must entitle the user to probable future economic benefit
So let's apply that test here. Is my shoe rack an asset?
1) The item must be within the control of the party
It's a shoe rack. It sits in the corner of my room now, having bought it at the reject shop in North Rocks. Why the reject shop?
Because I'm a student, and it's the best that I can do right now.
I'd like to think that I have adequate control over my shoe rack. Hell, I think my shoes have adequate control over my shoe rack. 7 pairs of my shoes and one pair of thongs sit on the different levels of this rack. They're heavy and durable, characteristic of the weight felt by walking a thousand miles in my shoes. They are a hardcore garment, and prevent my shoe rack from being blown away by the frequent tropical cyclones and gale force winds that give my room such a ravaged appearance.
Had this cow been wearing my shoes, it would be significantly less airborne
I don't expect my shoe rack to get up and run away any time soon. It doesn't have a life of its own, meaning it wouldn't cheat on me with any of my other furniture, without taking into account the risk of me smacking it down with my open palm (I joke!). So yes, I would like to think that I have adequate control over my shoe rack. At least I hope I do. The last thing I want is my friends to know me as 'the dude who couldn't even control a shoe rack'. They'd never ride in my car again.
2) The fair value of the item must be able to be reliably measured
Like I said earlier, I bought the shoe rack from the reject shop. It was a calculated investment, and I had seen it in the shop only a week before I rocked up today. That, my friends, is foresight at its best. The fair value is defined as the amount that I'd be willing to trade it for at an arms length transaction. So to illustrate the transaction that was made earlier today:
Dr Shoe Rack 12
Cr 'Cash' 12
It was a bitch to assemble though. A 12 dollar shoe rack from the reject shop, even if it was made in JAPAN, is still a 12 dollar shoe rack from the reject shop. Judging by build quality, improperly aligned screw threads and RUST, I'd deem it to be worth less than 12 dollars.
Assembling it was a pain in the ass, requiring the use of an electric screwdriver at several points to conquer the tinny-white beast. So taking into account things like build quality and the overall badassery that it took in accomplishing this feat, I think I'd have to recalculate the worth of this rack to be somewhere around here:
If I take away the drink from my happy meal, I'd still be reluctant to trade it for your piece of crap shoe rack
3) The item must entitle the user to probable future economic benefit
Yes. I do agree. This piece of crap shoe rack entitles me to far longer term economic benefits than your piece of crap happy meal does. While your kids are sent into prepubescent cardiac arrest (again, I joke!!), I won't be wondering where my shoes are, because I'll know EXACTLY where to find them. That is one of several perks that I am rewarded me having slayed this dragon.
Economic benefits come in abundance when you roll through life with a shoe rack my friends. I'll be out making more money, because the shoe rack helps me get there.
It calls my name to remind me, saying "Ren! don't wear those thongs today. You already have to run for the bus."
I won't have to reach under my dusty bed to grab a pair of shoes and risk triggering my already aggressive dust allergy, which might potentially lead to a sick day at work.
I'll be more fashion conscious and time efficient, because all my choices are right in front of me. It's like a smorgasbord of footwear at my convenient disposal.
And I think what might be the most rewarding benefit that I get from having built this shoe rack, is the overwhelming sense of accomplishment that I get.
Noah…I feel you bro.
So yep, I think I can, having applied Australian Accounting Standards, classify my shoe rack as an asset.
What implication does that have for me?
None whatsoever. I’ll clean the dust out from under my bed sooner or later, lol.
