In: Accounting
Because heritage assets typically generate negative cash flows there is a perspective that they should be treated as liabilities and not assets. Do you agree with this viewpoint? Justify.
Answer These assets are rarely held for their ability to generate cash inflows. In fact, in many instances there will be a real cost to the entity of holding the assets. Some would argue this makes them a liability! The primary purpose for retaining such assets is non-financial factors that are often intangible.
WheretWhere is no set definition in the accounting standards of what a heritage asset is, such assets generally have cultural, environmental or historical significance. Examples include historical buildings and monuments, conservation areas and artefacts. They are not limited to assets of a particular type or age. Because of this, there may be some judgement required in what assets fall within the definition of heritage assets and what are recorded as property, plant and equipment.
These assets are rarely held for their ability to generate cash inflows. In fact, in many instances there will be a real cost to the entity of holding the assets. Some would argue this makes them a liability! The primary purpose for retaining such assets is non-financial factors that are often intangible.
revaluations can be performed with the same requirements as for other categories of property, plant and equipment, or the assets can continue to be recorded at cost. Usually heritage assets won’t depreciate, or the useful life will be very long and difficult to assess making a reliable depreciation calculation impossible. Most commonly, heritage assets will not be depreciated and held in the financial statements at cost, but tested annually for impairment.